1 Magnificent Dividend ETF That History Says Has Never Disappointed Patient Long-Term Investors

From 2023 to 2025, one of the most popular dividend exchange-traded funds seemed to have finally lost its edge.

Over that three-year time frame, the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) returned a modest 22%. That was well behind the 86% return of the Vanguard S&P 500 ETF (NYSEMKT: VOO) and the 50% return of the WisdomTree U.S. Dividend Equity ETF (NYSEMKT: DTD), which can be used as a proxy for the entire dividend stock universe.

Before that, however, it had roughly nine straight years of top-notch performance. And this year, it's returned to its status as one of the elites of the dividend ETF category. While short-term performance can be choppy (as it can be with anything you invest in), long-term investors have consistently enjoyed a combination of strong returns and high yield.

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The three-year slump that tested investors' patience

Not every investment outperforms all the time. During the fund's first 10 years since its 2011 inception, conditions mostly worked in its favor. While the Schwab U.S. Dividend Equity ETF's 321% total return didn't quite keep up with the Vanguard S&P 500 ETF's 355% return over that same time, it's impressive that a fund heavily invested in healthcare, consumer staples, and energy stocks would nearly match the tech-heavy S&P 500.

But the 2023-2025 window saw it lag not just the broader market but also the dividend ETF and large-cap value ETF categories. Some of its sector rotations during its annual reconstitution proved ill-timed. Frequent top-10 positions, including United Parcel Service and Lockheed Martin, were also disappointments. Not to mention, of course, that mega-cap tech was pretty much the only area of the market really doing well, an area that this fund largely stays away from.

Even some of the most die-hard investors who'd been invested for years started to lose patience. The Schwab U.S. Dividend Equity ETF developed a reputation for having a nearly invincible strategy given its consistently strong performance. But even the best strategies will have periods where they underperform.

Income seekers, however, were not disappointed. The fund has managed to grow its annual dividend yield every year since its 2011 inception, and it's consistently maintained a yield of around 3%.

SCHD is built for long-term success

The period of 2023 to 2025 was an unfortunate reminder that even our favorite investments can experience multi-year slumps. But that's normal and should be expected with any long-term holding.

The great thing about the Schwab U.S. Dividend Equity ETF is that it executed the same strategy throughout -- one focused on dividend growth, yield, and balance sheet quality. In the years and decades to come, that kind of multi-pronged strategy is a great addition to your portfolio.

It won't outperform every year. But then again, it doesn't have to do so.

David Dierking has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Lockheed Martin, United Parcel Service, and Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.