The Schwab US Dividend Equity ETF (SCHD) has stabilized in the past two weeks, ending a four-week slump that started in November when it soared to a record high of $29.45. So, is this blue-chip dividend ETF a good asset to buy in 2025?
Schwab US Dividend Equity scorecard for 2024
The SCHD ETF fell short once again in 2024 even as it surged to a record high. Its stock jumped by 8% even as the S&P 500 and Nasdaq 100 indices soared by 26.3% and 26.27%, respectively.
While the price return is a good metric, it does not tell the real story since it does not include the dividends paid to shareholders. The SCHD ETF’s total return for 2024 was about 12%, while the other two had 26% and 27%, respectively.
The SCHD struggled because of its lack of exposure in the hottest sector in Wall Street: technology. Unlike the S&P 500 and Nasdaq 100 indices, the SCHD does not have a good exposure to the fast-growing companies like NVIDIA, Broadcom, and Microsoft.
The technology sector accounts for just 10% of the fund, making it the fourth-smallest one after utilities, basic materials, and communication services.
Technology stocks have done well, with five of the biggest companies globally being in the sector. Eight tech companies have a market cap of over $1 trillion, and more others will likely join the group in the next few years.
The tech companies in the SCHD ETF are old firms that are not growing as fast, including firms like Cisco, Texas Instruments, and Insperity.
Instead, the SCHD is made up of companies in other slow-growing sectors. Financial services companies account for about 20% of its business. It is followed by companies in the healthcare, consumer defensive, energy, industrials, and consumer cyclical.
According to its website, Pfizer, a highly-troubled pharmaceutical giant, is the biggest company in the SCHD ETF, accounting for 4.43% of the fund. The other top companies in the fund are Abbvie, Coca-Cola, Cisco, Blackrock, Bristol Myers Squibb, and Texas Instruments.
Outlook for 2025
Analysts are still highly upbeat about American stocks in 2025 as we wrote in this S&P 500 index forecast.
The general view is that corporate earnings will be strong this year and that the stock market will be boosted by Trump’s deregulation and tax cuts.
However, as I have warned before, there is a risk that the stock market will go through major headwinds this year because of Trump’s trade wars and the bond market. Recent data shows that bond yields have soared, and the thirty-year has formed an inverse head and shoulders pattern pointing to more gains.
Higher bond yields may push investors from the so-called dividend funds like SCHD and just invests in money market funds. They may also punish stock investors.
Therefore, after two years of back to back 20% gains, stocks may have a pullback this year, which will affect companies across the board. The most affected ones could be in the tech industry that have thrived amid AI tailwinds. With the AI industry expected to slow this year, there is a risk that these firms will pare back their gains.
SCHD ETF forecast
The daily chart shows that the SCHD ETF stock has been under pressure after soaring to a record high of $29.45 in November. It has stalled at the 23.6% Fibonacci Retracement level and moved below the 50-day moving average.
The stock has formed a bearish pennant pattern whose two triangles are nearing their confluence level. It has found strong support at the 200-day moving average.
Therefore, a drop below the 200 EMA will point to more downside, with the next point to watch being at the 50% retracement point at $25, about 7.7% below the current level.
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