Schwab’s SCHD: Why It’s My Top ETF Pick for 2025

If you’re looking for a high yield ETF that can still grow at a respectable rate, you’ll probably want to look no further than the Schwab US Dividend Equity ETF (NYSEARCA:SCHD). This fund is up by almost 60% over the past five years while being less volatile than most funds.

That’s because the fund is filled with mature dividend-paying companies. High-yield mature companies usually fall behind benchmarks like the S&P 500 and Nasdaq Composite, but they also don’t lose as much value during corrections. SCHD is optimal for people who want to de-risk their portfolios as they head toward retirement. 

Dividend investors who want ETFs to do the work for them should consider SCHD for the following reasons.

The Fund Is Well-Diversified

SCHD invests in 100 stocks and allocates its capital across several industries. Energy leads the way with 19.4% of the fund’s total assets. Many sectors have at least 10% of the fund’s total assets, indicating more diversity than most funds. 

Nine of the 10 top holdings have P/E ratios below 20. A low P/E ratio means that a stock doesn’t have as much room to fall during corrections. Furthermore, low P/E ratios can indicate that a stock is undervalued, but a fair P/E ratio depends on several factors, such as a company’s sector and growth rate.

SCHD investors should know that 40% of the fund’s total assets go into its top 10 holdings. That’s a respectable diversification compared to other funds. Many of the top U.S. benchmarks — such as the S&P 500 and Nasdaq Composite — are tech-heavy indices that pour the majority of their assets into the Magnificent Seven stocks. SCHD takes a different approach, which results in a higher yield.

SCHD Has Less Volatility

The fund has less volatility than most ETFs due to its focus on high cash flow. SCHD has a 3.87% yield over the past 12 months and a 0.06% expense ratio. You get solid cash flow while experiencing relatively stable prices.

For instance, SCHD only lost about 7% of its value in 2022. That year featured record-high inflation and many interest rate hikes. Meanwhile, the S&P 500 shed almost 20% of its value, and the Nasdaq Composite plummeted by 33%, marking its worst performance since 2008.

Tech-oriented funds look great during bull markets until the bear markets happen. SCHD offers more consistency and a better safety net than the other funds. As demonstrated in 2022, SCHD can still lose value, but the losses are less dramatic. This characteristic, plus the high yield, makes it more suitable for retirees.

The Fund Is Filled With Large-Cap Stocks

Not every investor wants large-cap stocks, but people who want less volatility and higher yields typically benefit from this group. The larger a stock is, the more effort it takes to move that stock from its current price level. SCHD has more than half of its holdings in large-cap stocks. Large-cap stocks and mid-cap value stocks make up more than 80% of the fund’s total assets, making it even more difficult for sharp price movements to occur.

Small-cap stocks can generate the highest returns under the right circumstances, but they are also the riskiest ones. Dividend investors who are eying retirement don’t want to take as many risks. The fund only has 7% of its holdings in small-cap stocks, and almost all of those holdings are in small-cap value stocks.

SCHD knows what types of investors it aims to serve and has constructed a high-yield, relatively low-volatility fund that achieves key objectives. The fund has delivered cash flow and respectable returns over the years.

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