The Schwab US Dividend Equity (SCHD) ETF stock price has staged a strong recovery recovery in the past two months as US equities recover. The ETF, which is widely followed by income-focused investors, has jumped by more than 14% from its lowest point in November.
Schwab US Dividend Equity lagged the S&P 500The SCHD ETF is one of the most popular ETFs in Wall Street, thanks to a combination of dividend growth and yield. In this case, the fund has a trailing dividend yield of 3.53%, which is higher than its competitors like VYM, DGRO, and DVY.
Most importantly, this dividend yield is supported by faster growth. Its 5-year CAGR growth stands at 13% while DGRO has 10.18%. This is notable since DGRO is the ticker for the iShares Core Dividend Growth ETF, which focuses on dividend growth over value.
The SCHD, however, has lagged behind other popular funds like QQQ and SPY because it is value-oriented. The other two are mostly made up of technology companies, popularly known as the Magnificent 7, which have surged recently.
As a value-focused ETF, the SCHD focuses on companies that show slow but consistent growth. Its top companies are Broadcom (AVGO), Abbvie, Merck & Co, Home Depot, and Amgen. All these are firms that have a substantial market share in their respective industries. They also have a record of paying dividends for years.
Most importantly, unlike SPY, which has a concentration risk, SCHD is more diverse. Its biggest industry is industrials (17.68%) followed by health care, financials, consumer staples, and IT. The six biggest sectors make up about 71% of the fund.
Now, the question is whether the fund will do well in 2024 after underperforming in 2023. Looking ahead, I suspect that American equities will do well this year because the Federal Reserve will ultimately start cutting rates. Even if it does, there is a high chance that it will signal of rate cuts ahead.
The main reason why the Fed may delay cutting rates is that inflation is sticky, especially now that there are geopolitical issues in the Middle East. In this case, the Fed could slash rates two times instead of 3% as it guided in December.
The other catalyst for SCHD is that earnings growth will continue this year. We have already seen companies like Taiwan Semiconductor and JP Morgan publishing strong results. With the US economy doing better, there is a likelihood that stocks will thrive.
Therefore, in this scenario, SCHD will likely combine both dividend growth and value appreciation, which is a good thing. Also, there are signs that regional banks have started to stabilize, which is positive because SCHD holds many of them.
Is SCHD stock a good buy in 2024?
I believe that the SCHD ETF will do well this year. Technically, the fund has already formed a golden cross on the daily chart, meaning that the 200-day and 50-day moving averages have crossed each other. It remains above the two averages on the weekly chart, signaling that buyers are in control. This is a sign that the fund will likely continue rising in 2024.
However, while SCHD is a good fund, I would not make it the biggest part of my portfolio. Instead, I would combine it with other growth-oriented ETFs like QQQ and SPDR S&P 500 (SPY) funds.
In addition to this, I would add a spot Bitcoin ETF such as the iShares Bitcoin Fund (IBIT). I believe that IBIT is better than BITO, which I recommended a while ago because of its expense ratio.
The goal of such a portfolio is to benefit with SCHD’s value while taking advantage of the expected growth in the S&P 500 and Nasdaq 100. In most cases, these indices tend to rise when the SCHD is doing well.
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