Is the Schwab US Dividend Equity ETF a Buy Now?

Core Insights - The Schwab U.S. Dividend Equity ETF has underperformed compared to other dividend ETFs like Vanguard Dividend Appreciation ETF and iShares Core Dividend Growth ETF over the past three years, leading to concerns among investors about their choice [5][9][18] - The current top holdings of the Schwab ETF include AbbVie, Lockheed Martin, and Cisco Systems, which differ significantly from the top holdings of other dividend-focused ETFs [8][9] - The underperformance of the Schwab ETF is attributed to its focus on value stocks, which have lagged behind growth stocks, particularly in the context of the recent AI-driven market dynamics [10][12][16] Fund Comparisons - Vanguard's Dividend Appreciation fund focuses on companies that have raised dividends for at least 10 years, while iShares Core Dividend Growth ETF requires only five years of uninterrupted dividend growth [2] - The Vanguard High Dividend Yield ETF currently has a trailing yield of 2.45%, compared to 2.2% for the iShares ETF and 1.6% for the Vanguard Dividend Appreciation fund [7] - The Schwab U.S. Dividend Equity ETF has a trailing dividend yield of approximately 3.7%, making it attractive for income-seeking investors despite its recent underperformance [9][18] Market Dynamics - The recent market performance has been heavily influenced by a few technology stocks, referred to as the "Magnificent Seven," which have significantly contributed to the S&P 500's gains since early 2023 [14][15] - Regulatory challenges and patent expirations have negatively impacted pharmaceutical companies like AbbVie and Merck, which are among the top holdings of the Schwab ETF [11] - The cyclical nature of the market suggests that value stocks may eventually see a resurgence, particularly if a market correction prompts investors to shift their focus from growth to value stocks [16][18]