- **Q: What is the Schwab U.S. Dividend Equity ETF (SCHD)?
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ARTICLE DETAIL
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Finance / Investing
SCHD Dividend ETF Focuses on Top Energy Stocks: Chevron and ConocoPhillips
The popular Schwab U.S. Dividend Equity ETF (SCHD) has recently shifted its top holdings, now featuring energy giants ConocoPhillips and Chevron prominently. This article explores why this highly-regarded, quality-focused dividend ETF favor...
Key Insights
- The Schwab U.S. Dividend Equity ETF (SCHD) is a major dividend ETF with over $70 billion in assets, known for focusing on dividend quality.
- It tracks the Dow Jones U.S. Dividend 100 Index, screening for high yields, consistent payments, and financial strength.
- Following its recent annual reconstitution, ConocoPhillips (COP) and Chevron (CVX) became the ETF's top two holdings (4.6% and 4.4% respectively).
- **Why this matters:** The ETF's focus highlights companies perceived as having high-quality, sustainable dividends, making its top holdings noteworthy for income investors.
- SCHD offers a combined dividend yield of around 3.7%, significantly higher than the S&P 500's average of ~1.3%.
In-Depth Analysis
The Schwab U.S. Dividend Equity ETF (SCHD) stands out in the crowded field of dividend funds due to its rigorous selection process based on the Dow Jones U.S. Dividend 100 Index. This methodology prioritizes not just yield, but the sustainability and financial health backing those payouts. The fund's recent reshuffle, elevating ConocoPhillips and Chevron to its top spots, reflects the current strength and dividend prospects seen in these energy leaders.
**Chevron (CVX):** A stalwart dividend payer, Chevron boasts 38 consecutive years of dividend increases. Its current yield stands at an attractive 4.1%. The company anticipates significant free cash flow growth, underpinning its ability to continue raising dividends at an above-average rate, further boosted by its pending Hess acquisition.
**ConocoPhillips (COP):** While lacking Chevron's long streak, ConocoPhillips has consistently increased its dividend since 2016, with accelerated growth in recent years (34% increase in 2024). Its yield is over 3%. The company aims for dividend growth in the top quartile of the S&P 500, driven by acquisitions (like Marathon Oil), strategic investments, and share buybacks.
Investors can gain exposure either through the diversified SCHD ETF itself or by considering individual investments in high-quality holdings like CVX and COP based on their specific income goals and risk tolerance.
FAQ
- **Q: Why are Chevron and ConocoPhillips top holdings in SCHD now?
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- **Q: Should I buy SCHD or individual stocks like CVX and COP?
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Takeaways
- The SCHD ETF offers a convenient way to invest in a diversified portfolio of quality dividend stocks with a yield (around 3.7%) significantly above the market average.
- The ETF's focus on quality highlights Chevron and ConocoPhillips as strong dividend payers in the energy sector.
- Investors seeking income could consider SCHD for diversification or analyze individual holdings like CVX (for higher yield and long history) or COP (for faster recent dividend growth) for potential inclusion in their portfolios.
Discussion
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Sources
Source: This Top Dividend ETF Loves These Leading Oil Stocks. Should You Buy Them, Too? (via The Motley Fool)
Source: Schwab U.S. Dividend Equity ETF™ (SCHD)
Source: Dow Jones U.S. Dividend 100 Index
Disclaimer
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