2024-07-26 10:31:26 ET
Summary
- The ETF SCHD has under-performed the S&P 500 due to the exclusion of technology stocks.
- History shows underweighting certain sectors can lead to under-performance, however, shares with substantial growth premium can also underperform in the longer term.
- Investing in dividend-paying stocks can provide stability, even if it means sacrificing the highest possible return.
- For investors deriving income from their portfolio's this can be a desirable trade-off.
- SCHD yields nearly 4% on a forward basis, maximizing the chance for a portfolio to achieve the 4% withdraws over a 30-year time horizon.
Recently, there have been a number of articles regarding the Schwab US Dividend Equity ETF ( SCHD ) and its under-performance relative to the S&P 500 ( SPY ) in the past year. In case you are unaware, SCHD is a fund whose goal is to track the Dow Jones US Dividend 100 Index. According to the prospectus , the fund invests in stocks of high dividend companies selected on strength relative to their peers by various financial metrics. These metrics include lower price to earnings (16.8x) and price to cash flow (10.0x), with higher return on equity (28.7%) and dividend yield ( forward yield 3.97%)....
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For further details see:
SCHD Vs. The S&P 500: It's Not Only About Total Return