Now, listen closely. There’s this fund, you see – the Schwab U.S. Dividend Equity ETF (SCHD +0.34%) – and it’s not nearly as complicated as those city gents like to make out. It’s a bit like a very clever magpie, collecting the shiniest, most reliable dividend-paying companies. A hundred of them, in fact. These aren’t flashy, newfangled things; these are the solid, dependable sorts, the ones that cough up a bit of income even when times are glum. It’s a simple trick, really, but it’s worked rather well, delivering a pleasingly plump return over the years.
This year, however, things have been…peculiar. The fund’s sprouted upwards by over 12%, leaving the S&P 500 looking rather droopy with its 3% slump. And what’s been driving this upward surge? Three rather large fellows: Lockheed Martin (LMT 0.74%), ConocoPhillips (COP +0.28%), and Chevron (CVX +0.34%). They’re a bit like three hefty chaps pushing a swing – and this year, they’ve been pushing it rather hard indeed.
Picking the Best, Not Just the Biggest
This fund isn’t run by some bright spark making clever guesses. Oh no. It’s a ‘passive’ fund, which means it follows a recipe. The recipe is called the Dow Jones U.S. Dividend 100 Index. This index doesn’t just grab any old dividend payer. It’s a fussy eater, you see. It checks for a good yield, a history of growing dividends, and a company that isn’t about to keel over and vanish. It’s a bit like choosing apples – you want the ones that are firm, red, and haven’t got any nasty worms inside.
Every year, the index has a bit of a clear-out, tossing out the rotten apples and adding new ones. Last March, it added ConocoPhillips, giving it a rather important position. Why? Because it was paying a decent dividend (over 3% at the time) and had been growing that dividend nicely – double-digit growth over the last five years, which is rather impressive. It’s a bit like a well-fed goose laying golden eggs.
Cashing in on the Oil… Without Trying
Last year, the index added five energy stocks, bumping up its exposure to that rather messy business from 12.2% to 21%. Now, it wasn’t because anyone predicted oil prices would rocket. Not at all. It was simply that these companies were paying good dividends at the time. Take Chevron, for example. It’s been increasing its dividend for 39 years straight! That’s a very long time, and it still yields over 3.5% even after this year’s little dance. It’s been growing its payout at 6% a year, which is a bit better than the average for the S&P 500.
Last year, though, this little strategy didn’t work out so well. The fund only gained 0.4%, while the S&P 500 shot up by over 16%. That’s because oil prices slumped, and these oil stocks lost a bit of puff. ConocoPhillips, for example, lost over 5% of its value. It was a bit like trying to push a swing downhill.
But this year… oh, this year is different. Shares of both ConocoPhillips and Chevron are up over 30%! And why? Because of that dreadful business in Iran, which has sent oil prices soaring. As the ETF’s second and third-largest holdings (with 4.7% weightings to both), they’ve been doing a lot of the pushing, driving up the fund’s return.
A Battle-Tested Dividend
And then there’s Lockheed Martin (LMT 0.74%), the fund’s top holding (4.9% weighting). It’s been contributing nicely too. Its stock has risen 33.5% this year, because everyone expects the unpleasantness in Iran to lead to more spending on… well, on things that go boom. It’s a rather grim thought, but it’s good for Lockheed Martin’s share price.
Now, the fund didn’t pick Lockheed Martin because it thought there’d be a war. Oh no. It picked it because of its dividend. It pays a decent yield (2.1% after the share price went up), which is better than the average for the S&P 500 (1.2%). And it’s been increasing its dividend for 23 years straight! It’s a solid, dependable company, and that’s what the index likes.
Investing in Quality: A Sensible Plan
So, the Schwab U.S. Dividend Equity ETF has had a good year, thanks to Lockheed Martin, Chevron, and ConocoPhillips. It allocated a lot to these companies because they’re high-quality dividend stocks. And that’s likely to continue paying off, long after the unpleasantness ends, because these stocks have historically delivered some of the highest total returns over the long term. It’s a sensible plan, really. A bit like planting a sturdy oak tree – it takes time to grow, but it’ll provide shade for many years to come.
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2026-03-16 18:12