Why This Schwab ETF Is a Favorite Among Retirees

For retirees or anyone focused more on stability than swing-for-the-fences growth, the S&P 500 isn’t always the most comforting choice. It’s heavily weighted toward large-cap tech names, and when those names fall out of favor, the whole index can wobble.

That’s why many investors approaching retirement gravitate toward dividend-focused funds. And one ETF in particular has emerged as a go-to is the Schwab U.S. Dividend Equity ETF (SCHD).

Key Points

• High yield with low volatility means SCHD delivers a 4% dividend yield and steadier performance than the S&P 500, ideal for retirees.

• Concentrates on energy, staples, and healthcare to reduce risk and avoid tech-driven swings.

• Low-cost, quality-driven thanks to charges of just 0.06% in fees and consistently grows dividends, averaging 12% annually.

What Makes SCHD Different?

Unlike many dividend ETFs that chase yield at the expense of quality, SCHD strikes a careful balance between income, quality, and durability.

The fund tracks the Dow Jones U.S. Dividend 100 Index, which filters for U.S. companies that not only pay dividends but also have strong fundamentals. That includes consistent earnings, solid return on equity, and a track record of sustainable dividend payouts.

As of 2025, SCHD has grown to over $68 billion in assets under management, which puts it in rare air among dividend ETFs. Even more impressive? It does this with an ultra-low expense ratio of just 0.06%, making it one of the most cost-efficient ways to capture quality dividend income.

Where SCHD Gets Its Firepower

The portfolio holds 100 stocks, but it’s far from evenly spread across sectors. Energy is the largest slice of the pie representing about one fifth, followed by consumer staples just shy of that percentage too. Those sectors are historically resilient during economic downturns and often flush with cash, a prerequisite for consistent dividend payments.

The top 3 holdings as of this writing are:

Texas Instruments (4.3%)  is known for analog semiconductors, TI might sound techy, but it’s a cash cow with a yield of 2.6% and a 20-year history of dividend growth.

Chevron is a heavyweight in energy and throws off a 4.8% dividend while ConocoPhillips, another energy play, offers a solid 3.5% yield and benefitting from rising oil prices tied to geopolitical instability.

Together, these holdings illustrate SCHD’s philosophy of high-quality companies with the financial strength to support and grow dividends.

Why Retirees Love It And Why Wall Street Doesn’t Always

SCHD is deliberately light on technology. While that can be a drag during bull markets led by the likes of Apple and Nvidia, it becomes an asset when markets sour. For example, in 2022, while the S&P 500 cratered nearly -18%, SCHD’s drop was far more muted, cushioned by its avoidance of frothy tech valuations and its tilt toward defensive sectors.

In other words, SCHD trades off explosive growth potential for reduced volatility and consistent income, exactly the profile many retirees crave.

A 4% Yield Without Reaching for Risk

At a time when the S&P 500’s dividend yield sits around 1.2%, SCHD offers a generous 4.0% yield, more than triple that. What’s more, it does it without loading up on junky high-yield names. Every company in the ETF must pass a rigorous screen for financial health and dividend sustainability.

This is crucial because many high-yield ETFs chase the biggest payouts, often from companies with shaky fundamentals. SCHD avoids that trap. In fact, it includes a 10-year minimum dividend history filter and favors firms with high free cash flow.

Over the past decade, SCHD has grown its dividend payout at a faster clip than the S&P 500, averaging nearly 12% annual growth in distributions. That makes it a stealth inflation fighter, your income stream grows as prices rise.

So, Should You Buy It?

If you’re a retiree, or just someone who prefers steady returns over stomach-churning volatility, SCHD deserves a spot on your radar.

It’s not going to beat the Nasdaq in a bull market, and it’s not designed to. But it offers something that’s becoming increasingly rare, a blend of high yield, low cost, broad diversification, and lower risk. It also rebalances quarterly, which ensures it stays disciplined rather than drifting toward whatever sector is hot at the moment.

Are there other dividend ETFs out there? Of course. But very few match SCHD’s combination of scale, quality screening, and track record. That’s why it’s not just a product, it’s a cornerstone in many retirement portfolios.