Is SCHD really a good Sleep Well at Night (SWAN) ETF?

The Schwab US Dividend Equity ETF (SCHD) has soared to a record high this year even as it continued to underperform the broader market. It has risen by 2.65% in 2024 while the other generic ETFs like the Vanguard Total Stock Market Index (VTI), SPDR S&P 500 (SPY), and the Invesco QQQ (QQQ) have jumped by over 9%. 

Is it a SWAN ETF?

The SCHD ETF has done well this year as its assets ballooned to over $55 billion. It has soared to a record high and is up by over 132% from its lowest point in 2020. 

This performance happened because of its strong history of dividend growth and yield. Data shows that the dividend yield stands at 3.40%, meaning that $100k invested in the fund brings in about $3,400.

The dividend yield, together with its 5-year CAGR of 11.80%, has made it a good Sleep at Well at Night (SWAN) ETF among investors. 

However, some investors still question whether SCHD is really a good ETF to invest in. In recent articles, I explained why the fund underperforms the generic funds like the SPY, QQQ, and VTI. While these funds have a lower yield, they are known for having strong growth.

Another concern is that many high-yielding companies have a long track record of generating strong returns. Some of these companies are in industries like real estate and master limited partnership (MLP).

Energy Transfer (NYSE: ET), a leading MLP, has a forward dividend yield of 8.10% while Enterprise Product Partners (EPD) yields 7.23%. Kinder Morgan and MPLX have a forward yield of 5.90% and 8.36%. All these stocks have a higher yield than the Schwab US Dividend Equity ETF.

The same is true with other REIT companies. Realty Income yields about 5.95% while Simon Property, NNN, and VICI Properties yield over 5%. SCHD ETFs beat these companies because of its diversification. It has over 100 companies in all industries like financials, consumer discretionary, and utilities.

There are other high-yielding alternatives. The VanEck Fallen Angel High Yield Bond ETF (ANGL), iShares Fallen Angels US Bond ETF (FALN), and the iShares High Yield Systematic Bond ETFs also yield over 6%. 

US bonds are also yielding better than the SCHD because of the higher interest rates. One month’s Treasury bills are yielding 5.4% while the 10-year and five-year are yielding 4.3% and 4.41%. Therefore, while these bonds have little growth, I believe that they are better alternatives for now.

SCHD ETF analysis

SCHD chart by TradingView

The weekly chart shows that the Schwab US Dividend Equity ETF has been in a strong bull run in the past few months. It recently jumped above the crucial resistance at $76, its previous all-time high.

The ETF has also formed a break and retest pattern by retesting the now-support at $76. In most cases, this is one of the most popular continuation signs in the market. However, it has also formed a small double-top chart pattern.

Therefore, more upside will be confirmed if the fund rises above the double-top level at $80.80. If this happens, the fund will have more upside. However, as an investment, I believe that there are better alternatives like the generic ETFs like SPY and QQQ.

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