Trading News Schwab US Dividend Equity ETF SCHD Investment

Trading News - Schwab U.S. Dividend Equity ETF (SCHD) is a commendable financial instrument designed for savvy investors. As of the last market closing, it was priced at $74.80. On the subsequent day, the ETF kicked off trading at $75.01 and oscillated between $74.78 and $75.16 during the day's range. This figure is within the broader 52-week range of $65.96 to $79.49. The ETF has seen a significant trade volume of 2,623,599 shares, albeit slightly lower than its average volume of 3,194,746.

The ETF is backed by substantial net assets worth $47.61 billion, presenting a stable investment opportunity. Its current PE Ratio stands at 14.22, and the ETF offers a reasonable yield of 3.58%. Since the beginning of the year, it has given a daily total return of 1.01% and operates with a low expense ratio of 0.06%. Its beta of 0.81 suggests it is less volatile than the market.

Looking at the SCHD's monthly performance, it experienced a consistent rise in value from April to July 2023. In July, it opened at $72.51, peaked at $75.16, and eventually closed at $74.97, mirroring its performance from the previous month. During this time, it also managed to maintain a stable adjusted close at $74.97, with a remarkable volume of 39,415,700.

The ETF’s option calls for August 18, 2023, show that the most recent contract with a strike price of $68.00 was traded at $5.66, with a bid and ask spread of $7.00 to $7.60. Meanwhile, the option put at a strike price of $63.00 was traded last at $0.10, with the bid and ask figures standing at $0.00 and $0.10, respectively.

The ETF has delivered a YTD daily total return of 1.01% and performed remarkably well in the long run. Its 1-year, 3-year, and 5-year daily total returns stand at 7.21%, 15.64%, and 11.87%, respectively. This contrasts the category returns that yielded 10.90% YTD, 17.04% in the past year, and 15.36% over the previous five years.

In terms of annual total return history, SCHD has demonstrated robust performance over the years. It triumphed with a substantial gain of 32.89% in 2013 and continued to prosper despite slight hiccups in 2015 and 2018.

SCHD offers an opportunity to invest in high-quality assets at a lower valuation, trading at less than 14X forward earnings in a market that trades at 20X. This represents a value buy opportunity, especially when considering that tech stocks are trading at almost 30X.

Moreover, SCHD trades at 9.8X cash-adjusted earnings and 8X cash flow. This is significantly lower than the 11.5X average price that private equity firms are paying and almost as affordable as the deals available to billionaire investors.

The ETF has historically delivered returns around 13%, a number that overshadows the S&P 500's historical returns of 10%. This fact, coupled with the S&P 500's overvaluation by 15%, makes SCHD an attractive investment prospect.
The fund tracks the Dow Jones U.S. Dividend 100 Index, which identifies high-dividend-yielding U.S. companies. This methodology is executed with the utmost precision, focusing on firms that have consistently paid dividends for at least ten consecutive years. This strategic choice enables investors to gain exposure to a diversified portfolio of high-quality, large-cap, dividend-paying U.S. companies.

The top holdings in SCHD’s portfolio as of July 2023 are some of the most stable and profitable firms in their respective sectors. This includes IBM Corp. (5.86%), Pfizer Inc. (4.78%), Exxon Mobil Corp. (4.34%), Procter & Gamble Co. (4.23%), and PepsiCo Inc. (4.12%).

The SCHD's asset allocation strategy, which leans towards defensive sectors, is quite noteworthy. As of July 2023, SCHD's largest sector allocation was Consumer Discretionary at 24.13%, followed by Health Care (23.22%), Information Technology (18.69%), and Consumer Staples (17.98%). This investment style can potentially provide an insulating effect during market downturns.

The overall risk rating of the SCHD is moderately low, making it suitable for investors looking for a conservative approach to the U.S. equity market. Its Sharpe ratio of 1.22 indicates that it provides satisfactory risk-adjusted returns.

Another important aspect to consider is the fund's distribution yield, which stands at 3.56%. This attractive yield, significantly higher than the S&P 500's average, can be a good source of income for investors, especially those seeking to build wealth over time.

The ETF has a record of distributing dividends quarterly. In the most recent distribution, the SCHD offered $0.532 per share. This distribution has been growing steadily over the years, marking a substantial 5-year growth rate of 7.32%.

SCHD also performs well in ESG (Environmental, Social, and Governance) ratings with a score of BBB, indicating its commitments to sustainable investment principles.The ETF mainly targets large-cap stocks, with about 91.64% of the portfolio allocated to large companies, 8.17% to mid-cap, and a tiny portion, about 0.19%, to small-cap stocks. This allocation aligns with the fund's strategy to focus on high dividend, stable, and established firms, offering investors a safety cushion in volatile markets.

Concerning geographical allocation, the ETF invests almost entirely in U.S. stocks, adhering to its index's mandate. The minuscule non-U.S. allocation is likely due to the multinational nature of some constituent companies.

In regards to its expense ratio, SCHD's management fee of 0.06% is one of the lowest in its category. The ETF's low costs, along with its tax efficiency, make it an attractive option for cost-conscious investors.

The fund's turnover rate, at 13%, implies a relatively stable portfolio with infrequent trading. A lower turnover rate often leads to lower transaction costs and potential tax liabilities, providing another layer of appeal for long-term investors.

Furthermore, the fund's dividend payout ratio, which stands at approximately 65%, is another promising feature of SCHD. This payout ratio suggests that the companies in the ETF's portfolio retain a portion of their earnings for growth and reinvestment, while still providing a substantial dividend yield to investors.

The fund's earnings growth is also impressive. The 3-year earnings growth rate for the SCHD is 9.47%, indicating solid profit growth among its constituent companies.

Regarding liquidity, SCHD is quite favorable with its high trading volumes, resulting in tighter bid/ask spreads and making it easier for investors to get in and out of the fund.

Lastly, while analyzing an ETF like SCHD, it's important to remember its sensitivity to interest rates due to its focus on dividend-yielding stocks. Historically, these types of stocks have had a negative correlation with rising interest rates. Therefore, any changes in the Federal Reserve's monetary policy could impact the fund's performance.
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