SCHD Just Flipped: Why Dividend Investors Are Buying Now

The most popular dividend ETF, SCHD, is winning in early 2026. It's up over 11% year to date. This is while the broader market, like the S& P 500, is down 2% year to date, and the NASDAQ 100 is down 2. 2% year to date. Now, you may think that this is just a lucky bounce back for SCD after a couple years of underperformance, but the truth is that most investors are completely missing the real reasons why this is happening. That has to do with the sectors and stocks that SCHD actually owns. That's what really drives the returns. After all, we're investing in businesses. Today, I'm going to give you the exact reason why SCHD is crushing it. Plus, I'll explain how this may or may not change when SCD has a reconstitution later this March. With that said, let's roll the intro and get into this SCHD analysis.

The following reflects the opinions of a man who spends far too much time thinking about stocks. Please do your own research before making any investment decisions. Nothing in this video is personal financial advice. Continue at your own risk. My name is Zach. This is Dividend Data. You should leave a like and subscribe to the channel if you enjoy the video. We

create some of the best tools for dividend investors. Things like our research terminal, which I show throughout the video. And we just launched dividend data for spreadsheets, which lets you access all of our data directly in the spreadsheet. This makes it possible to build incredibly powerful dashboards in Excel and Google Sheets, and they update live with real data. All you have to do is click refresh. So, if you have tons of dividend stocks, it can save you a boatload of time getting all of your data and keeping an up-to-date tracker. And I know SCD investors care a lot about the dividends. So, if you want this portfolio tracker spreadsheet I made, which gives you an income calendar and all the important dividend dates coming up, just head over to dividend. com, enter your email, you can sign up for free. And later this week, I'm going to be releasing the portfolio tracker spreadsheet available for all users. And you can see how 10,000 shares into SCD that will pay you over $11,000 in annual dividends. If you want to try

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And with it you'll be able to follow along and research stocks just like me. But today we're doing an ETF, one of the most popular dividend ETFs. If you spend any time online related to dividends, you're going to see SCHD in the comments. If you're in that dividend Reddit group, all they talk about is SCHD. In fact, I just saw today there's an entire Reddit just about CHD. And it does make sense why it's popular. This is a very low expense ratio fund, 0. 06%, and its dividend yield is significantly higher than that of the S& P 500 or NASDAQ 100. The SCHD dividend yield over the trailing 12 months is 3. 4%. The S& P 500, by comparison, is 1. 15%. That makes SHD a more reliable path for someone looking for that financial independence retire early, which a large segment of dividend investors are after. You can have a diversified ETF and get to that living off your dividend income nearly three times faster. SCG even has dividend growth as well. Although has slowed down in recent years, the 5-year keer is still 6. 75% and each payment is a regular, but there is a long trend of growth. On a forward-looking basis, the SCHD dividend is estimated to be a $111. That gives it a 3. 61% dividend yield at current prices. And typically, SCHD has a dividend yield between 3 and 4%. However, if we take a look at the stock price chart for SCHD, it becomes a little clear of how they underperformed in recent years. And ironically, this was when the fund was getting incredibly popular, too. If you had bought this ETF in mid 2021 at around $26 a share, this ETF in terms of share price was flat until November 2025. That's more than 4 years of no price appreciation. Now, of course, it was up and down along the way, but the growth was lacking. But us divid investors, we know that with a fund like SCD, a big part of your return is also from reinvesting earned dividends. So even during that period of no growth, you were still getting some returns in that period. And I'll show you that by looking up the SCHD stock performance on our AI analyst. Here we can select the total return. And I zoomed in specifically to that period I was talking about where there was very little price growth. So from August 2021 to November 2025, just over 4 years, the total return in that period was 22. 9%. That's a 5% compound annual growth rate. So, yes, it did underperform the market significantly in that time, but you weren't losing money. If you had invested $10,000, that money would be worth $12. 3,000. But with how well a CHD has done in early 2026, it's starting to make the results look a little better. The funds up more than 11% year to date, which gives us a 5-year total return of 56. 7%, which is a compound annual growth rate of 9. 4%. 4%. So that's still slightly underperforming the market overall, but it is much more reasonable. And if we zoom out all time since the fund started in 2011, SCD has a 486% total return, which is a compound annual growth rate of 13. 1%. Many dividend investors were getting

frustrated with the poor performance of SCHD. But now that it's doing so well in early 2026, people are wondering whether it will last. So, I will dive into the actual holdings and sectors of SCHD and I'll explain why the fund has been going up and give my personal thoughts of whether or not this will continue and I'll also explain how the upcoming reconstitution will impact the fund and whether or not this really changes my thoughts of how it will perform over the long term. Anytime that I analyze an ETF, the big things I look at are the actual businesses they own because this is really how you start to visualize what you actually are investing in. what do you own and it starts to add the context to why a fund is underperforming or why it may be outperforming during a period. So overall the current composition of SCHD we'll start by looking at the sectors. It's 20% energy stocks. Those would be things like oil and gas. It's 18% consumer defensive or consumer staples. These would be consumer products you see at a grocery store, something like Coca-Cola or PepsiCo. It's 15% health care, 11% industrials, 9. 8% consumer cyclical, 9. 7% technology, and 9. 15% financial services. Now, to give you some context here, I went and loaded up the S& P 500. And this will start to explain how different investing in SCHD is versus investing in popular indexes like the S& P 500. And it will make the differences in performance start to become obvious. The S& P 500 is 34% technology. That is a big difference from 9%. The next largest sector in the S& P 500 is financial services at 12. 5%. Followed by communication services at 11. 25%. And a little bit of a spoiler alert here. A lot of those communication services stocks, a big chunk of that is technology because I would consider Google to be a technology stock, but for some reason the market likes to label them as communication services. So, if you're investing in SCHD, you have very little exposure to tech. And that starts to explain why it's doing well right now because the number one factor that is driving down the market in early 2026 is the software selloff. Basically, AI is tanking all these software stocks because people don't know the future of these software businesses. And I've made quite a few videos going over what I think about that trend. And I've dove into some of the opportunities I see in that sell-off. But SCHD is doing very well in 2026 partially because they don't own any of that software sector which is being indiscriminately sold off. But it's even more fundamental than that. And I dove into this in my recent dividend portfolio update. It's the idea of certainty versus uncertainty, which is a very big factor when investors analyze stocks. When you're investing in a business, I'll look up Microsoft here as an example. You're buying an ownership stake in that business. A fundamental part of investing is determining the intrinsic value of the company. The entire game of investing is trying to forecast the amount of cash flows the business will produce in the future. You are then discounting that back into the present value today. So, there's a lot of factors in there. It's how much money will the company make, but also how soon because a dollar is worth more today than it is 10 years from now. But a big factor that's often not talked about but really drives the market is the idea of certainty. How sure are you about those future cash flows. And with AI, people are concerned. They are seeing how rapidly software is getting created. And people are starting to question how big of a moat some of these software companies have. Will they even exist 10 years from now in the same way they do today? So despite a company like Salesforce as an example, one of the best enterprise software companies in the world, hitting an all-time high in their earnings per share and showing a constant track record of growth, they are in the middle of a massive selloff. And they are just one example of countless software stocks in the market. And now we're starting to understand more about why SCD is doing well. The one factor, they don't own the software stocks. But the next factor is building upon that idea of certainty. What SCHD does own is companies that are very certain. They are businesses with reliable cash flows, dominant and proven business models. These are companies which investors are perceiving to be safe. So in early 2026 when money is moving out of those uncertain sectors, money is moving in to safe companies. So if we look at the top holdings for SCHD, we have Lheed Martin a very safe defense contractor, Kico Phillips, a big oil giant, Verizon, Chevron, Bristol Meyers, the Altria Group, Merc, Coca-Cola, PepsiCo, these stocks make up the top 25% of SCHD. And individually, if you look at all of these companies, they are outperforming in early 2026. Early in this year, value stocks and dividend stocks are doing very well. And even beyond that flight to safety and value, there are additional factors causing energy stocks and defense stocks to do quite well right now. As an example, there's a war in Iran right now. Oil prices have now surged. It hit over $100 today. It's coming back down though. And oil prices are up 64% year to date. So if we remember the stocks that SCHD owns, Chevron, that stock's up 22% year to date. Kico Phillips, another oil stock that's up 22% year to date. We have Loheed Martin, big defense contractor. There's a war going on. We're also expected to see the highest defense budgets ever. Loheed Martin stock is up 35% year to date. So when you look at all of this in context, it makes a ton of sense why SCHD is doing so well in early 2026. But I'll be honest, I don't think it's going to continue outperforming over the long term. A lot of these stocks are now becoming priced at a premium. Ironically, value stocks are not the value in today's market. You have stocks like Chevron and Exxon Mobile trading at historically low dividend yields, trading at 25 times earnings. You have companies like CocaCola, which are great businesses, but they're trading at all-time highs in prices. Coca-Cola is up 12% year to date. It's trading at 25 times trailing earnings, 24 times based on forwardlooking earnings. And these value stocks, they have high certainty cash flows, and they're good dividend payers, but you can't pay up for these companies cuz they don't have the growth underneath them. And growth is a huge factor of investing. So the exact reason why a CHD has been outperforming, I think they're going to underperform. They don't own enough technology and that's where a lot of the value is in today's market. You have companies like Microsoft which are compounding earnings per share very high nearly 20% annual earnings per share growth and they're trading at 25 times trailing earnings. And when you just think about it like that, Chevron, Exxon Mobile, and Coca-Cola, they shouldn't be trading at the same multiple of something like Microsoft. And if we're purely talking in terms of total return, if we just look at the top holdings of the S& P 500, I feel a lot more comfortable being diversified across this basket of companies because they have the dominance and the growth to back it up.

But with that said, SCHD, they're going to be updating their foldings later this month and their recomposition. I personally don't think much is going to change. It probably will be quite similar in their diversification and it will be the same general theme of being light on technology. But again, and I'm only saying this so that you know what you own. This has been a huge benefit in early 2026. That's why it's outperforming. And there will be periods where that kind of strategy outperforms. And this is even more of a highlevel analysis. Most people who are buying SCD, they don't even necessarily care about it matching in terms of total return. SCHD has become the dividend investor ETF. People are buying it for the dividend. And as I mentioned earlier, that's providing a diversified, stable fund that you can have in your portfolio as a very easy part of a dividend investing strategy. That's why people like it. I personally choose to invest in individual stocks in my dividend growth portfolio. I've been updating it every single month on the channel going back for five plus years at this point. And you've got to watch me grow this account from $30,000 to $320,000. But that's just my strategy. That's why they make menus at restaurants. People like different things. And if you want to use the portfolio tracker, stock analysis tool, and AI analyst over on dividend data. com. It's all available for you, we currently have our March Madness sale, which gives you 50% off annual membership. And you can lock in that discount price for life. And it also bundles together that dividend data terminal with our new product, dividend data for spreadsheets, that's available for both Google Sheets and Excel. And basically, it lets you access all of our financial data, and I mean all of it. You can build your own trackers or use pre-made templates which I will be releasing throughout the month. As an example, we have this portfolio dashboard. And if you head over to dividenda. com and sign up, you can sign up for free. The spreadsheet tool, you can start using it for free. And if you sign up, you'll get an email later this week with the template. If you own SCD and some dividend stocks, this will be perfect for you. Very easy to use. You just enter in the ticker, the number of shares, and you'll get a full income calendar, and it will just help you keep track of your dividend portfolio. The link is in the description and pin comment.