Why Ditching Schwab U.S. Dividend Equity ETF In the AI Era Is a Mistake

Core Insights - The rise of artificial intelligence (AI) has significantly impacted the stock market, benefiting technology companies and growth-oriented investments while putting pressure on dividend-focused funds like the Schwab U.S. Dividend Equity ETF (SCHD) [2][4] Group 1: ETF Overview - The Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 Index, focusing on high-quality U.S. firms with consistent dividend payments and strong financial ratios [3] - The ETF currently offers a trailing yield of approximately 3.8%, which is higher than the S&P 500's payout, and has a low expense ratio of 0.06% [3] Group 2: Performance Analysis - The SCHD has underperformed during the AI boom, with year-to-date total returns being near flat or slightly positive, while tech-focused funds like the Invesco QQQ Trust have seen stronger gains [7][8] - The ETF's portfolio is heavily weighted towards stable dividend payers in sectors such as energy (19%), consumer discretionary (18%), and healthcare (16%), with limited exposure to high-growth AI leaders [6][8] Group 3: Market Dynamics - The AI surge has concentrated market gains among a few mega-cap tech stocks, which prioritize reinvesting profits into growth rather than paying dividends, thus limiting their representation in SCHD's portfolio [5] - The equity risk premium has approached zero in 2025, indicating potential overvaluation reminiscent of the dot-com era [8]