This Dividend ETF Yields 3.2% and Is Beating the Nasdaq-100 This Year

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is having an exceptional year, contempt being considered a much blimpish money compared to growth-focused funds. The money has returned astir 20% successful 2026 arsenic of this writing, up of the astir 11% summation successful the S&P 500. And it's up of the tech-heavy Nasdaq-100's astir 17% return, too.

That is not however this usually goes.

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The maturation indexes person acceptable the market's gait for astir of the artificial quality (AI) boom, and income funds person been the happening investors held for stability. Yet present is simply a $95 cardinal portfolio of dividend payers trading astatine a 52-week high, yielding astir 3.2%, and charging conscionable 0.06% successful yearly expenses.

Here's a person look astatine however the money pulled it off.

How the money picks its 100 stocks

The exchange-traded money (ETF) tracks the Dow Jones U.S. Dividend 100 Index, and the index's admittance rules bash astir of the work. To beryllium eligible, a institution indispensable person paid dividends for astatine slightest 10 consecutive years. Real property concern trusts and maestro constricted partnerships are excluded entirely.

From that pool, the scale evaluates the highest-yielding stocks connected 4 fundamentals: escaped currency travel comparative to full debt, instrumentality connected equity, dividend yield, and five-year dividend growth. The apical 100 marque the cut, with buffer rules that favour existent constituents. No azygous banal tin transcend 4% of the scale astatine rebalance, and nary assemblage tin transcend 25%. The full happening is reviewed annually and rebalanced quarterly.

Those prime screens matter. Ranking connected escaped currency travel comparative to full indebtedness and connected instrumentality connected equity helps the scale debar output traps (companies whose abdominous dividends are a informing motion of a deteriorating business). The money wants payers that tin support paying -- which is precisely what I privation from a dividend holding, too.

The effect is simply a portfolio that looks thing similar the maturation indexes. The biggest holdings are UnitedHealth Group, Home Depot, and Abbott Laboratories, each astatine astir 4.3% to 4.5% of assets, alongside names similar Coca-Cola, Procter & Gamble, and Chevron. Healthcare makes up astir 21% of the portfolio, and user staples different 21%.

And what the rules surface retired matters conscionable arsenic much. The market's ascendant AI names, with their tiny yields oregon abbreviated dividend histories, don't travel adjacent to qualifying. Scan the fund's apical 25 holdings and you won't find Nvidia, Microsoft, oregon Alphabet.