Schwab U.S. Dividend Equity ETF’s concentration exceeds peers by 12 points, raising questions about diversification for investors.
Schwab U.S. Dividend Equity ETF (SCHD) now holds 42 percent of its $71.6 billion portfolio in just 10 stocks, significantly above the roughly 30 percent typical for large-cap dividend peers. The concentration reflects the fund’s focus on high-quality dividend payers, but it may limit diversification for some investors.
SCHD tracks the Dow Jones U.S. Dividend 100 Index, screening for cash flow, return on equity, and dividend growth. The fund’s quarterly payout has risen from $0.12 to $0.26 since 2011, reinforcing its appeal as an income generator for retirees. However, its heavy tilt toward a few holdings could pose risks as a standalone core holding.
While the ETF remains a low-cost option for income-focused investors, its growing concentration may shift its role from a core holding to a complementary sleeve in broader portfolios.