The Schwab U.S. Dividend Equity ETF Has Surged Over 12% in 2026. Its 3 Top Holdings Have Been Major Contributors to Its Rally.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) has a precise elemental strategy. It invests successful 100 of the champion high-yielding dividend maturation stocks. These companies supply the fund's investors with a bully blend of income and growth, which has historically enabled it to present beardown mean yearly full returns.

This year, the money is already up much than 12%, meaningfully outperforming the 3% slump successful the S&P 500. The robust returns of its apical 3 holdings -- Lockheed Martin (NYSE: LMT), ConocoPhillips (NYSE: COP), and Chevron (NYSE: CVX) -- are a large origin driving the dividend ETF's beardown returns this year.

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The Schwab U.S. Dividend Equity ETF is simply a passively managed fund. Its strategy is to way the show of the Dow Jones U.S. Dividend 100 Index. That scale screens companies based connected respective dividend prime characteristics, including yield, five-year dividend maturation rate, and fiscal strength.

The scale reconstitutes its 100 holdings erstwhile a twelvemonth (late March), jettisoning companies that nary longer walk its screens, portion adding those that do. Last March, the scale added ConocoPhillips astatine a 4% weighting, putting it successful the apical 10 alongside holdovers Lockheed Martin and Chevron. It added the lipid and state elephantine owed to its compelling output (over 3% astatine the time) and beardown five-year dividend maturation complaint (ConocoPhillips has delivered double-digit annualized dividend maturation implicit the past 5 years).

ConocoPhillips was 1 of 5 vigor stocks the scale added past year, which boosted its vulnerability to the vigor assemblage from 12.2% to 21%. It did truthful not due to the fact that of an anticipation that vigor prices would increase, but due to the fact that the assemblage boasted immoderate of the highest-quality, high-yielding dividend stocks astatine the time. For example, Chevron has accrued its dividend for 39 years successful a row. The lipid giant, which inactive yields implicit 3.5% aft this year's rally, has grown its payout astatine a 6% annualized complaint implicit the past 5 years, supra the S&P 500's 5% annualized dividend maturation rate.

The summation of ConocoPhillips and different vigor stocks initially worked against the money past year. The Schwab U.S. Dividend Equity ETF gained lone 0.4% past year, importantly underperforming the S&P 500's much than 16% rally. The fund's lackluster show was owed successful portion to the tepid returns of its lipid banal holdings arsenic crude prices slumped successful 2025. For example, ConocoPhillips mislaid much than 5% of its worth past year.