The Dividend ETF Quietly Delivering Double-Digit Returns While Most Investors Aren't Paying Attention

Source The Motley Fool

Key Points

  • The Schwab U.S. Dividend Equity ETF's low exposure to technology makes it an ideal complement to the AI trade.

  • The ETF pays a strong dividend and has aggressively raised it over the years.

  • A strong yield and fair valuation jump out, even after the ETF's strong run.

  • 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›

Wall Street's infatuation with artificial intelligence (AI) has caused many non-tech stocks to fall by the wayside over the past several years. However, money has started to rotate back into other market sectors.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD), a popular dividend exchange-traded fund, is up by 26% over the past year. That's without factoring in dividends.

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You see, many prominent dividend-paying stocks hail from outside the technology space. Here's what could be driving this move and why it could continue.

The AI trade could be showing its age

For roughly three years, AI stocks have seemingly been the only stock market trade that mattered. As a result, many stocks in other sectors lagged.

Stock ETF analyst drawing a line for percentage growth.

Image source: Getty Images.

Of course, nothing lasts forever. Eventually, money was bound to begin flowing out of crowded AI and tech stocks and into stocks that investors have largely overlooked.

That helps explain the Schwab U.S. Dividend Equity ETF's strong performance over this past year. The ETF tracks the Dow Jones U.S. Dividend 100™ Index, a bucket of established U.S. companies with a history of paying, and oftentimes increasing, dividends.

Technology stocks represent less than 10% of the Schwab U.S. Dividend Equity ETF. Instead, it's heavier in sectors such as:

  • Healthcare: 20.7%
  • Consumer Staples: 20.4%
  • Energy: 14.1%
  • Industrials: 11.6%
  • Financials: 10.1%

In other words, the ETF is essentially a counter to the AI trade. I'm not predicting the end of the AI trade. Still, money is bound to eventually go to where investors perceive value.

The ETF still offers a lot to dividend investors

There's still a reasonable chance that the Schwab U.S. Dividend Equity ETF will perform well over the coming months and beyond. The ETF's holdings still trade at a blended price-to-earnings ratio under 20. It's a fair valuation for many of the prominent dividend stocks in this ETF, including highly regarded blue chip stocks such as Texas Instruments, Procter & Gamble, Coca-Cola, Chevron, and others.

Additionally, the ETF still yields a solid 3.2% in dividends, and Schwab has raised the fund's distribution by over 550% since its inception in late 2011. Its expense ratio is just 0.06%, a very low fee compared to other funds.

Finally, the ETF remains an excellent complement to most portfolios for its high yield and low technology concentration. Even the S&P 500, which most investors reference when speaking about the broader U.S. stock market, is approximately 37% concentrated in tech stocks.

Add it all up, and buying some shares of the Schwab U.S. Dividend Equity ETF could be a smart portfolio move, regardless of what the AI trade might do next.

Should you buy stock in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $391,581!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,334,780!*

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*Stock Advisor returns as of October 17, 2026.

Justin Pope has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron and Texas Instruments. The Motley Fool has a disclosure policy.

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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