SCHD: Be Thankful To Mr. Market For An Opportunity To Buy More

In the ever-volatile dance of equity markets, moments of dip often disguise themselves as gifts in disguise. The Schwab U.S. Dividend Equity ETF (SCHD) offers such a moment in early 2025, where short-term price fluctuations have created a buying opportunity for investors patient enough to look past the noise. With a robust dividend pedigree, a track record of outperformance, and a recent pullback tied to its quarterly distribution, SCHD now presents a compelling entry point for long-term income seekers and growth-oriented investors alike.

Performance Overview: Steady Gains Amid Volatility

SCHD entered 2025 with momentum, delivering a +4.47% YTD return through February 28, closely tracking its benchmark, the Dow Jones U.S. Dividend 100 Index (+4.50%). However, March’s closing price of $27.96—down slightly from February’s peak of $28.28—reflects the ETF’s sensitivity to market rotations and dividend ex-dates. The ETF’s +1.77% quarterly return (January 2–March 31) underscores its resilience, even as broader markets faced headwinds.

While March’s dip might deter the faint-hearted, it aligns with SCHD’s historical behavior: dividend distributions often trigger temporary price corrections as investors capture payouts. The March 26 dividend of $0.25, for instance, caused a sharp drop to $27.67 on its ex-date before rebounding—a textbook example of “dividend drag” followed by normalization.

Dividend Discipline: The Foundation of SCHD’s Appeal

SCHD’s strategy of targeting high-quality, dividend-paying U.S. equities has been its cornerstone since inception. The ETF’s March distribution marked its first payout of 2025, continuing a streak of $0.25–$0.26 quarterly dividends since late 2024. Over time, this consistency has translated into meaningful income for investors.

As of February 28, a $10,000 investment in SCHD had grown to $29,871 since its 2011 launch, outpacing the Large Value Category’s $23,599. This outperformance stems not just from capital appreciation but also from compounding dividends, which have grown steadily despite macroeconomic turbulence.

Volatility as an Ally: Buying the Dip

The March pullback, while modest, offers a tactical entry for investors. SCHD’s 2024 premium/discount data reveals its price often fluctuates around market sentiment—trading at a premium on 153 days and discount on 65 days. Such volatility, though unsettling in the short term, creates periodic discounts to intrinsic value.

Historical context reinforces this perspective. SCHD’s worst 3-month period (-21.55% in late 2019/early 2020) was swiftly reversed by a +18.01% rebound in early 2021, showcasing its ability to recover from dips. Today’s environment, while not crisis-level, mirrors such opportunities: the ETF’s 1-year return of +14.39% outpaces its 10-year average of +11.30%, yet its March 2025 price remains within a historically constructive range.

Conclusion: A Dividend Machine at a Bargain Crossroads

SCHD’s recent price action is less a signal of weakness and more a reminder that even high-quality ETFs experience cyclical corrections. With a dividend yield of ~3.6% (as of March 2025), a fortress-like portfolio of dividend stalwarts (e.g., Microsoft, Johnson & Johnson, Coca-Cola), and a track record of outperforming the Large Value Category by wide margins, now is an opportune time to build or rebalance positions.

The ETF’s +4.47% YTD return and its ability to grow $10k into nearly $30k over 14 years speak to its reliability. While Mr. Market’s mood swings may keep prices volatile in the near term, patient investors will thank themselves for buying during these dips. As the old adage goes: “Be fearful when others are greedy, and greedy when others are fearful.” In SCHD’s case, the time to be greedy is now.

In summary, SCHD’s dividend discipline, long-term outperformance, and recent price dip coalesce into a rare opportunity. For those with a multi-year horizon, this pullback is not a warning but an invitation—one that prudent investors should embrace.