An SCHD Comeback in 2026? Why I'm Not Seeing It Yet.

Core Viewpoint - The Schwab U.S. Dividend Equity ETF has struggled to keep pace with the market due to its focus on traditional dividend-paying stocks, while growth stocks, particularly in technology, have driven returns in recent years [3][4][5]. Group 1: ETF Performance and Market Trends - The Schwab U.S. Dividend Equity ETF has underperformed compared to its peers and the Morningstar Large Value category over the past three years, primarily due to its heavy allocation towards defensive and energy stocks [4][5]. - The ETF's yield of 3.7% is not compelling compared to other investment options, such as Treasury bonds, which offer yields above 3.5% [7]. - The ETF's significant 19% allocation to the energy sector has been problematic, as this sector has underperformed relative to the S&P 500 [8]. Group 2: Future Outlook and Potential Catalysts - A potential improvement in market breadth, with a rotation away from megacap tech stocks towards value and dividend payers, could benefit the ETF [9]. - Earnings growth in technology, driven by AI, may slow down, allowing other sectors to contribute positively to the ETF's performance [11]. - A market correction could favor defensive and dividend stocks, potentially leading to a resurgence in the ETF's performance [13]. Group 3: Investment Strategy and Considerations - The ETF's investment strategy is well-constructed, focusing on dividend growth, quality, and high yield, which helps filter out underperforming stocks [15]. - Despite recent struggles, the ETF remains a solid choice for a core dividend equity position in a portfolio, although its ability to outperform the market in 2026 is uncertain [15].