SCHD's Dividend Quality Filter Now Concentrates 42 Percent of Your Money in Just Ten Stocks

SCHD holds 105 stocks and charges 0.06%, aiming to provide diversification through dividend quality screening. The fund tracks the Dow Jones U.S. Dividend 100 Index, selecting U.S. companies with a ten-year dividend history and metrics such as cash flow to total debt, return on equity, dividend yield, and five-year dividend growth. It reconstitutes annually in March and rebalances quarterly. While individual holdings like Texas Instruments, UnitedHealth, and Qualcomm pass quality filters, the portfolio’s concentration is substantial, with the top ten positions around 42%. Performance can be strong in the short term, but over five years it has lagged broad equities, and sector risks include pharma patent cliffs and energy exposure to crude prices.

"Three concentrations are worth pricing in before you treat SCHD as a diversifier. The pharma cluster. Many of SCHD's pharma holdings are walking through patent cliffs. Humira biosimilars chewed AbbVie's (ABBV) Humira sales to $688 million last quarter, a 39% drop year over year. Revlimid loses U.S. exclusivity in November 2026. JANUVIA is already off 28% from generic pressure. The screen rewarded their dividend histories. It cannot see the patent calendar."

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