Schwab's Dividend ETF Has Gained 25% This Year. Is It Still Worth Buying?
2026-10-16 07:13
•Daniel Sparks •The Motley Fool
•••• • Axe Cap view
Is Schwab’s Dividend Rally a Signal to Buy or Pause?
After a 25% jump in 2026, Schwab’s Dividend ETF looks pricey with a shrinking yield.
The Schwab U.S. Dividend Equity ETF (SCHD) has delivered an impressive 25% gain this year, nearly doubling the S&P 500’s return. But dig beneath the surface and you see a cautionary tale. The dividend income—the real reason many chase dividend ETFs—has barely budged, up only 1%. Meanwhile, the share price has surged, pushing the yield down from 3.8% to 3.1%. In other words, you’re paying more for roughly the same income. For South African investors, this matters because USD/ZAR volatility adds another layer of risk when buying US dollar assets priced on earnings and dividends. The projected 7% annual return over five years reflects this valuation reset and modest dividend growth, which is hardly exciting for income-focused portfolios. If you’re chasing yield, local names like Standard Bank or MTN might offer better returns with more predictable dividends, even if growth isn’t as flashy. That said, if the US market manages to avoid recession, SCHD’s prospects could surprise. But right now, don’t chase last year’s fireworks this far into the year. this is just our opinion and not financial advice
Trim exposure to SCHD after the strong run, especially if you rely on dividends to fund expenses. Consider reallocating to South African dividend payers like Standard Bank or MTN, which offer better near-term yield visibility. Watch USD/ZAR closely as dollar weakness could improve returns on US positions.
- SCHD
- USD/ZAR
- Standard Bank
- MTN
- US economic slowdown reducing dividend growth
- Rand volatility increasing currency risk on US investments
6/10
The Schwab U.S. Dividend Equity ETF (SCHD) has surged 25% in 2026, significantly outpacing the S&P 500's 13% gain. However, the fund's dividend payout has barely grown (only 1% year-over-year), with the gains driven primarily by price appreciation rather than increased dividends. The fund's yield has compressed from 3.8% to 3.1%, making it more expensive relative to its income. The analyst projects a more modest 7% annual return over the next five years, assuming dividend growth of 6% annually and a slight yield expansion to 3.4%.
Our take is based on reporting first published by The Motley Fool.