After three years of disappointing performance, the Schwab U.S. Dividend Equity ETF (SCHD +0.15%) is on a tear again.
Year to date, the fund is up 22.8% compared to an 11.8% gain for the S&P 500. That return puts it near the top of the U.S. dividend ETF category in 2026.
A number of factors have worked in the fund's favor, and they should remain in place for the rest of the year.
Image source: The Motley Fool.
Concerns about inflation and higher interest rates are making investors less inclined to bid up expensive tech and growth stocks. With oil over $100 a barrel and inflation still well over 3%, the opportunity for value to continue outperforming looks good.
With the economy still in relatively good shape, corporate earnings growth strong, and valuations slowly shrinking, the outlook looks good for the dividend-paying stocks that the Schwab U.S. Dividend Equity ETF targets.
NYSEMKT: SCHD
Key Data Points
As long as corporate earnings keep growing at a double-digit rate, as currently expected over the next several quarters, I think it's going to be tougher for stocks to experience a significant short-term pullback. A slowdown in artificial intelligence (AI) spending could be a negative catalyst for this, but this seems less than likely.
Taken together, all of this suggests the environment looks solid for value and dividend-paying stocks. The Schwab U.S. Dividend Equity ETF's focus on high-quality, high-yield dividend growth stocks could rally as investors continue to migrate to these segments of the market.
Even with 2026's gains in the rearview mirror, it is still a good time to invest in this ETF.
