The Schwab US Dividend Equity ETF (SCHD) has jumped this year, helped by the ongoing rotation out of the artificial intelligence (AI) industry. It soared to a record high of $36.38, up more than 30% year-to-date. The rally could continue in the coming weeks or months as demand for the blue-chip dividend ETF accelerates.
SCHD inflows and performance are doing well
The Schwab US Dividend Equity ETF has soared by over 35% from its lowest level in December last year. It has done better than the blue-chip S&P 500 and Nasdaq 100 indices for the first time in years.
American investors have piled into the fund, with the inflows in the last 30 days rising by over $2.7 billion. Inflows have soared by over $26 billion this year, bringing its assets under management to $120 billion, making it the biggest dividend ETF in the world.
SCHD ETF is doing well because of its composition. A closer look shows that its biggest constituents are companies in areas like consumer non-durables, health technology, energy minerals, electronic technology, and finance.
The biggest companies in the fund are companies like Procter & Gamble, Texas Instruments, Coca-Cola, Home Depot, Amgen, PepsiCo, Chevron, and Abbott Laboratories.
All these are traditional companies that have a limited exposure to the data center and AI industries. These firms are in the other side of the AI boom. Instead of developing AI models, these companies are using AI tools to lower their costs. For example, companies in the healthcare industry are using AI to accelerate their drug discoveries.
The SCHD ETF has also done well because of the ongoing energy boom. Top companies like Chevron, ConocoPhillips, EOG Resources, and OneOK have done well as crude oil and gas have jumped by double digits this year.
SCHD vs US government bonds
‘The main question among investors is whether to invest in the SCHD ETF, which has a dividend yield of 2.94%. In contrast, US government bonds are yielding much higher rates today. The ten-year yield has jumped to 4.99%, while the 30-year and 5-year yields have soared to 5.35% and 4.82%, respectively.
The reality, however, is that in terms of total return, the SCHD will continue doing well in the long term. For example, if you invest $100,000 in the ten-year yield today, the interest income in the next 12 months will be $4,870.
A similar investment in SCHD will make about $3,200 in dividends. The only difference is that SCHD will benefit from the rising SCHD price. For example, in the last 12 months, the SCHD ETF has had a total return of over 30%.
SCHD ETF technical analysis
SCHD ETF chart | Source: TradingView
The daily chart shows that the SCHD ETF has done well this year and is now hovering near its all-time high. It recently jumped above the important resistance level of $35.30, its highest point in August. Most notably, it has now retested that level, confirming the break-and-retest pattern.
The ETF has jumped above all moving averages and the Supertrend indicator. Top oscillators like the Relative Strength Index (RSI) and the MACD have continued rising this month. Therefore, the fund will likely continue rising as bulls target the key resistance level of $40. This view will be confirmed if it jumps above the all-time high of $36.
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