Schwab U.S. Dividend Equity ETF Outperforms S&P 500 in 2026

The Schwab U.S. Dividend Equity ETF (SCHD) has generated a year-to-date total return of approximately 23.4% in 2026, significantly outpacing the S&P 500, which has returned 15.1% over the same period. This performance gap has positioned the exchange-traded fund as a notable alternative to the broader market benchmark for investors seeking excess returns.

SCHD is a low-cost index fund with an expense ratio of 0.06% that holds 102 stocks. The fund tracks the Dow Jones U.S. Dividend 100 index, which focuses on companies characterized by financial strength and the capacity to sustain high-quality dividends. Since its inception in October 2011, SCHD has delivered average annual returns of 13.11%. Over the past three years, the fund’s annualized return based on net asset value has reached 15.44%. The 23.4% return reported for last year aligns with the year-to-date figure cited for 2026.

Income generation remains a primary feature of the fund, which currently offers a 30-day SEC yield of 3.32%. The trailing-12-month yield stands at 3%. These payout levels are described as superior to those of many other dividend index funds.

The fund’s composition provides a buffer against specific macroeconomic risks, particularly regarding interest rates. With the Federal Reserve hiking rates in September and bond yields rising, concerns have emerged about a "higher-for-longer" interest rate environment. Such conditions typically disadvantage companies with lower credit ratings due to increased borrowing costs. However, SCHD holdings tend to maintain strong balance sheets with ample cash and limited debt, reducing their vulnerability to rising rates.

Furthermore, SCHD offers diversification away from the technology sector, which accounts for approximately 40% of the S&P 500. The concentration of the S&P 500 in artificial intelligence and megacap tech names creates exposure to potential volatility in that trade. In contrast, SCHD is less tech-heavy. Its top sector holdings are healthcare at 20.7%, consumer staples at 20.4%, and energy at 14.1%. Information technology represents only 9.2% of the fund’s assets, ranking sixth among its holdings.

Historical performance during market downturns supports this defensive positioning. During the 2022 bear market, the tech-heavy Nasdaq-100 index declined by 32%, and the S&P 500 dropped by 18%. Over that same period, SCHD declined by approximately 3%. While no guarantee exists that any asset class will remain safe in future downturns, this track record highlights the fund’s relative resilience compared to broader market indices.