1 No-Brainer ETF I’m Loading Up on in 2026 and Beyond
Exchange-traded funds (ETFs) are among my favorite ways to invest in the stock market because they can check many boxes at once. They can be diversified, hands-off, and, depending on the ETF, a strong source of income. This is why I’m a fan of the Schwab U.S. Dividend Equity ETF (SCHD -1.12%).
SCHD is a core dividend ETF in my portfolio. I’ve continued to load up on it this year, and I’ll keep doing so for the foreseeable future. If you’re looking for a high-quality ETF to add to your portfolio, SCHD is well worth considering.
Schwab U.S. Dividend Equity ETF
Today’s Change
(-1.12%) $-0.39
Current Price
$34.41
Key Data Points
AUM
$113B
Dividend Yield
3.05%
Expense Ratio
0.06%
Top Holdings
MRK
4.88%
AMGN
4.81%
ABT
4.63%
SCHD provides exposure to well-established companies
SCHD holds 102 stocks that have checked off five key criteria:
- At least 10 consecutive years of dividend payments
- At least five years of dividend growth
- An above-average dividend yield
- Strong free cash flow compared to debt
- A good return on equity (a measure of capital efficiency)
If a company checks those boxes, it’s generally worthwhile, which means SCHD acts as a natural vetting process. You know you’re investing in solid companies with proven track records. Most companies are in the healthcare (20.72%), consumer staples (20.38%), energy (14.7%), industrials (11.55%), and financials (10.05%) sectors, which checks out, given that they’re generally mature and cash-flow-heavy.
Some of SCHD’s top holdings include Merck, Coca-Cola, Chevron, UnitedHealth Group, and Procter & Gamble.
Image source: Getty Images.
A dividend worth holding on to for the long haul
SCHD has been on quite a run this year, with total returns of 29% compared to the S&P 500‘s (^GSPC -0.58%) 13.7% (as of Sept. 7). That run-up is appreciated, but investors shouldn’t routinely expect it. The appeal of SCHD has always been in its high dividend yield and stability.
SCHD’s current dividend yield is 3%, more than three times what you’d get from an S&P 500 ETF. It’s still a bit lower than its average over the past three years, but that trade-off reflects how much the ETF has appreciated over that period.
SCHD Dividend Yield data by YCharts
Its yield will inevitably fluctuate, but to me, if SCHD can maintain at least a 3% long-term yield, it’s well worth holding on to. There are, of course, plenty of stocks that offer higher yields than SCHD, but they also come with company-specific risks that you don’t have to deal with in a diversified dividend ETF.
If you have a Roth IRA, consider buying SCHD shares in that account to take advantage of tax-free compounding. Ideally, you’d reinvest your dividends to accumulate more shares over time, and then enjoy the tax-free cash payouts whenever that time comes (after you’re 59 1/2 years old and made a contribution at least five years ago).
