Schwab U.S. Dividend Equity ETF reconstitution reweights holdings, elevating health care and tech while cutting energy exposure; dividend yield surpasses the S&P 500.

It has been a rocky start to the year for many major indexes and big-name stocks. In that environment, dividend stocks have remained a focus for investors because they provide passive income through payouts, even when share prices are volatile.

One widely followed option is the Schwab U.S. Dividend Equity ETF (SCHD), which was up 0.16% at the time of the report. The article highlights SCHD’s screening approach and recent portfolio changes, along with its dividend yield relative to broader benchmarks.

How SCHD selects companies

To be included in the Schwab U.S. Dividend Equity ETF, companies must meet four key criteria tied to the index the fund tracks, the Dow Jones U.S. Dividend 100 Index. The ETF evaluates a company’s five-year dividend growth, return on equity, cash flow to debt, and dividend yield.

The article notes that while high yields can sometimes reflect “yield traps,” the fund’s eligibility requirements are designed to reduce the likelihood of weaker dividend sustainability.

Recent reconstitution reshaped sector exposure

In its most recent annual reconstitution, the ETF removed 22 stocks and added 25. Removals cited include AbbVie, Cisco Systems, and Valero. Additions cited include UnitedHealth Group, Procter & Gamble, and Abbott Laboratories.

Following the reconstitution, sector exposure shifted. Health care and tech increased by 3.6% and 3.4%, respectively. At the same time, energy and materials exposure decreased by 7.1% and 3%, respectively.

Dividend yield and market context

As of market close on April 1, the ETF’s dividend yield was close to 3.5%, slightly below its 3.6% average over the past three years. The article also states that SCHD’s dividend yield is more than three times the S&P 500 average.

Over the past three years, the ETF’s average yield is described as more than 2.5 times the S&P average.

Impact of lower energy exposure

The article points to the reduction in energy exposure as a notable change. It attributes the sector’s strength over the first three months of the year to the Middle East conflict, which it says has driven up oil prices. It also notes that changes in that situation could reverse the trend, making reduced exposure a relevant consideration.

Fund snapshot cited in the report

• Current price: $30.56
• Day’s range: $30.38 - $30.64
• 52-week range: $23.87 - $31.95
• Volume: 21M

The article concludes that while SCHD may not offer the highest yields available from individual stocks, it is positioned as a vehicle for consistent, growing passive income through a dividend-focused ETF structure.