The Schwab U.S. Dividend Equity ETF (SCHD) closed Friday, Oct. 30, at $35.78, marking its 28th record close in 2026. Including dividends, the fund has returned approximately 34 percent this year, crushing the S&P 500's 11 percent gain.
This is SCHD's strongest calendar year since inception in 2011. The fund's previous best full year was 2013, when it returned around 33 percent. The price alone has climbed roughly 31 percent, with a 5 percent surge since mid-October.
But here's the catch for income investors: higher prices mean lower yields. The last four dividend payments totaled around $1.05 per share, translating to a 2.9 percent yield at the current price. That's a sharp drop from 3.1 percent in mid-October and 3.8 percent at the close of 2025.
This compression is real. An investor deploying $1,000 today collects roughly $29 annually in income, compared to $38 a year had they invested at 2025's close.
History offers a cautionary parallel. SCHD yielded 2.8 percent at the end of 2021 after posting a 30 percent return that year. What followed: an 18 percent price decline by Sept. 30, 2022. The fund didn't reclaim its 2021 year-end price until July 2024—a 2.75-year wait. Even counting dividends, shareholders lost 3 percent in 2022.
However, that same 2021 buyer, with dividends reinvested, is now up roughly 58 percent, averaging about 10 percent annually. The annual payout on that original investment has grown 41 percent since 2021—an effective yield of approximately 3.9 percent on the initial cost basis.
The dividend growth story powered that recovery. Payouts rose 11 percent in 2021 and 14 percent in 2022. But the growth engine is sputtering. Dividend increases dropped from about 12 percent in 2024 to roughly 5 percent in 2025. The most recent four payments show only 2 percent growth over the preceding four—a material deceleration.
For new buyers at today's depressed yield, the bet is that dividend growth reaccelerates. Without it, the 2.9 percent current yield offers limited margin of safety if valuations compress or equities stall.
On valuation, SCHD looks reasonable. The fund's September price-to-earnings ratio was approximately 18, compared to 25 for the broader large-cap market tracked by the Schwab U.S. Large-Cap ETF. That discount is real. But it reflects the market's growing skepticism about dividend growth sustainability.
Income investors should ask themselves: Are you buying SCHD for 2.9 percent current yield in a rising-rate environment, betting on a dividend acceleration that may not materialize? Or are you holding it for the long-term compounding power that rewarded 2021 buyers with 58 percent gains? The answer determines whether SCHD belongs in your portfolio at these prices.
