Unexpected things happen in the stock market all the time. For instance, there’s one popular exchange-traded fund (ETF) that generated a total return of 53% in the five-year period from the start of 2021 to the end of 2025. This year, it’s put on an incredible performance that’s nearly half that.
Meet the unstoppable dividend ETF that has registered a total return of 26% so far in 2026 (as of July 29), crushing the S&P 500 index by a wide margin. Income investors should think about buying and holding for the next 20 years.
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There’s a focus on fundamentals
The investment vehicle that is thriving right now is the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). Offered by massive asset manager Charles Schwab, it tracks the performance of the Dow Jones U.S. Dividend 100 Index. So, there are 100 stocks in total.
The ETF currently has $105 billion in assets. Its expense ratio of 0.06% is compelling. And the trailing-12-month dividend yield is a healthy 3.3%.
There is an extreme focus on quality here. Companies must meet certain criteria before being added to the ETF. The first bar to clear is that these stocks must have paid dividends in at least 10 straight years. This eliminates a lot of contenders.
Fundamentals come into focus next. Businesses are selected based on four key factors: cash flow-to-debt ratio, return on equity, dividend yield, and five-year dividend growth rate. No single position can represent more than 4% of the holdings.
The financial strength of these companies directly benefits investors. Not only are the dividends durable, but they have risen over time. In the past decade, the dividend payout has more than tripled.
Add stability to your portfolio
The information technology sector has a huge weighting in the S&P 500 index. Consequently, the closely watched benchmark has a bigger tilt toward growth businesses. This includes the “Magnificent Seven” stocks, which account for a significant share of the benchmark. Investors will agree that this setup adds greater upside. But they might also find that it makes things riskier.
Here’s where the Schwab U.S. Dividend Equity ETF adds value. Its portfolio is different. The top two sectors are healthcare and consumer staples, together accounting for 41% of the portfolio. Companies in these industries are considered resilient to recessions. The ETF’s top three holdings right now, Abbott Laboratories, Amgen, and Merck, fit the description.
