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The Schwab US Dividend Equity ETF (SCHD) has gained 12% year-to-date with a 3.39% dividend yield and 10.61% average annual dividend growth over 10 years, outperforming the Vanguard High Dividend Yield ETF (VYM) at 2.35% (DGRO) at 7.49% three-year dividend growth. SCHD has only 9% in tech stocks, 21% allocation to energy, 17% to consumer defense, and 16% to healthcare, compared to significant tech exposures in VYM and DGRO.
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With capital moving from speculative AI stocks to defensive dividend stocks, SCHD is positioned to lead dividend ETFs after a three-year run.
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Tech and growth ETFs are constantly changing, and it’s hard to keep up with them. Even certain dividend ETFs have turned themselves into tech stocks using covered calls, and Schwab US Equity Dividend ETF (NYSEARCA:SCHD), Vanguard High Dividend Yield Index Fund ETF (NYSEARCA: VYM )and iShares Core Dividend Growth ETF (NYSEARCA:DGRO) Only the refugees remain.
When someone wants a common stock ETF they can buy, hold and reinvest for snowballing income, they often prefer to just sell instead of holding several at once. 2026 started out as a tumultuous year, so looking at this year’s performance is a good gauge of how these ETFs may perform over the long term.
Of course, performance over the past few months alone is not a good barometer of how they might perform in the future. We will also see what the future holds for each of them.
READ: The analyst named NVIDIA in 2010 Just naming his top 10 AI stocks
No beating around the bush here. This ETF has been killing it for the past few months, and it will surprise you if you can’t keep up with the market. The Schwab US Dividend Equity ETF was one of the worst performing dividend equity ETFs from 2022 to 2025. You barely got any capital gains, and the dividends you got weren’t enough to put you ahead of the market.
Many other ETFs run AI portfolios, while SCHD had the fewest tech names to talk about in its holdings. This set the stock back significantly, as non-AI stocks lagged behind.
2026 changed the equation significantly, and SCHD began the year with a large number of well-to-do partners. Investors are no longer blindly buying into any company that presents itself as an AI company. Wall Street is now very picky about companies it believes deserve a premium, and for the first time in a while, capital is finally flowing into defensive and dividend stocks. This is SCHD’s place, and I expect the ETF to be very high this year.
Obviously, you can’t expect this ETF to give you a 50% gain because it has gained 12% year-to-date. What I expect is that SCHD stops following and instead starts leading the dividend ETFs.
Even when SCHD looks anemic, I call it the “King of Dividend ETFs” ahead of the 2026 launch.
My argument is that this ETF only looks like an underperformer when you discount the dividend. Even in the period from 2022 to 2025, where capital gains were lower, those who reinvested dividends still kept with SCHD partners.
And speaking of dividends, this is the only major ETF where you get an almost perfect balance between potential and income. The dividend yield is 3.39%, and no other major ETF offers a higher yield than that without significant upside potential.
Here’s how SCHD has performed against VYM and DGRO so far this year, adjusted for inflation, dividends reinvested.
SCHD is obviously huge.
The current trajectory is unlikely to last long given how fast the ETF has risen, but I expect strong returns for the Schwab US Dividend Equity ETF. Investors across the board are realizing just how reliable this ETF is after its stellar performance this year. More than 21% of its holdings are in the energy industry, followed by 17% in consumer discretionary and 16% in healthcare. This energy allocation is often in steady and stable business.
Both VYM and DGRO have significant technical details and can leave you a lot to optimize the technology. SCHD gives you only 9% exposure to technology, that too within established dividend payers, not predictable growth stocks.
As it relates to VYM, you get a dividend yield of 2.35%, which is lower than what SCHD is offering. It’s also not a “high” dividend yield, as the name of the ETF suggests. Over the past five years, the stock has grown just 3.79% per year, and the rate of growth is actually slower as the stock has grown at a 5% annual clip over the past 10 years and a 2.49% annual clip over the past three years.
Surely, the iShares Home Dividend Growth ETF, or DGRO, would have higher growth, right? Yes, it has higher growth than VYM, but it still comes after SCHD. The 3-year dividend growth rate is 7.49% per year, and 7.11% per year when you look at the 5-year growth rate. The 10-year average annual growth rate is at 8.59%.
SCHD’s 3-year dividend growth rate is slightly behind DGRO’s at 7.06%, with a 5-year one at 9.15% per annum. If you look at the 10-year average, it’s at 10.61%. That way, you get both a higher headline yield, higher near-term performance, and a higher dividend yield. What’s not to like?
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