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1 No-Brainer ETF I'm Loading Up on in 2026 and Beyond

· Nasdaq Market Structure

Key Points

  • The Schwab U.S. Dividend Equity ETF's (SCHD) criteria act like a natural vetting process for investors.

  • SCHD currently offers a dividend yield about three times that of an S&P 500 ETF.

  • Investing in SCHD in a Roth IRA is a great way to take advantage of tax-free compounding and dividend payouts.

  • 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›

Exchange-traded funds (ETFs) are among my favorite ways to invest in the stock market because they can check many boxes at once. They can be diversified, hands-off, and, depending on the ETF, a strong source of income. This is why I'm a fan of the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD).

SCHD is a core dividend ETF in my portfolio. I've continued to load up on it this year, and I'll keep doing so for the foreseeable future. If you're looking for a high-quality ETF to add to your portfolio, SCHD is well worth considering.

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SCHD provides exposure to well-established companies

SCHD holds 102 stocks that have checked off five key criteria:

  • At least 10 consecutive years of dividend payments
  • At least five years of dividend growth
  • An above-average dividend yield
  • Strong free cash flow compared to debt
  • A good return on equity (a measure of capital efficiency)

If a company checks those boxes, it's generally worthwhile, which means SCHD acts as a natural vetting process. You know you're investing in solid companies with proven track records. Most companies are in the healthcare (20.72%), consumer staples (20.38%), energy (14.7%), industrials (11.55%), and financials (10.05%) sectors, which checks out, given that they're generally mature and cash-flow-heavy.

Some of SCHD's top holdings include Merck, Coca-Cola, Chevron, UnitedHealth Group, and Procter & Gamble.

A dividend worth holding on to for the long haul

SCHD has been on quite a run this year, with total returns of 29% compared to the S&P 500's (SNPINDEX: ^GSPC) 13.7% (as of Sept. 7). That run-up is appreciated, but investors shouldn't routinely expect it. The appeal of SCHD has always been in its high dividend yield and stability.

SCHD's current dividend yield is 3%, more than three times what you'd get from an S&P 500 ETF. It's still a bit lower than its average over the past three years, but that trade-off reflects how much the ETF has appreciated over that period.

Its yield will inevitably fluctuate, but to me, if SCHD can maintain at least a 3% long-term yield, it's well worth holding on to. There are, of course, plenty of stocks that offer higher yields than SCHD, but they also come with company-specific risks that you don't have to deal with in a diversified dividend ETF.

If you have a Roth IRA, consider buying SCHD shares in that account to take advantage of tax-free compounding. Ideally, you'd reinvest your dividends to accumulate more shares over time, and then enjoy the tax-free cash payouts whenever that time comes (after you're 59 1/2 years old and made a contribution at least five years ago).

Should you buy stock in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $421,997!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,413,876!*

Now, it’s worth noting Stock Advisor’s total average return is 978% — a market-crushing outperformance compared to 213% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

*Stock Advisor returns as of September 8, 2026.

Stefon Walters has positions in Coca-Cola. The Motley Fool has positions in and recommends Chevron and Merck. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.

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