Investment Strategy2025-09-27

Dividend ETFs Surge as SCHD Leads the Income Investment Sector

Investors seeking stable dividend income are flocking to high-quality dividend ETFs such as SCHD. Amid market uncertainty, the importance of dividend investment strategies is gaining prominence, and the role of dividend ETFs in asset allocation continues to expand.

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As market volatility persists, dividend ETFs that provide steady cash flow are drawing significant attention. SCHD (Schwab US Dividend Equity ETF) in particular has been generating consistent performance by focusing on high-quality dividend stocks, capturing growing investor interest. Dividend investing offers volatility buffering and inflation hedging benefits, playing a critical role in portfolio asset allocation.

SCHD's Investment Appeal

SCHD offers an annual dividend yield of approximately 3.5% paired with a low expense ratio of just 0.06%. Its rigorous selection criteria—emphasizing dividend consistency and financial soundness—result in a low risk of dividend cuts. Over the past month, SCHD has risen 1.8%, demonstrating its defensive character relative to the S&P 500. Allocating roughly 10–20% of a portfolio to SCHD can secure steady cash flow while buffering volatility. Using an asset allocation calculator to determine the appropriate dividend ETF weighting based on individual investment goals is essential.

The Role of Dividend Strategy in a Portfolio

Dividend ETFs occupy a middle ground between growth stocks and bonds, serving a balancing role in asset allocation. During periods of rising inflation, they tend to outperform bonds due to the potential for dividend growth, and during market downturns they act as a cushion through dividend income. High-quality dividend ETFs like SCHD, combined with bond ETFs such as AGG, are key components that enhance portfolio stability. For investors aged 50 and above, gradually increasing the allocation to dividend ETFs as part of retirement planning is a particularly effective strategy.

Dividend ETF Rebalancing Strategy

While dividend ETFs tend to deliver relatively stable returns, their weight within a portfolio can drift from target levels depending on market conditions. During growth-stock bull runs, the relative weight of dividend ETFs may decline, warranting additional purchases. Conversely, during market corrections their defensive characteristics can cause their weight to increase, potentially requiring partial profit-taking. Using a rebalancing calculator to review dividend ETF allocations on a quarterly basis and making adjustments only when they deviate beyond a ±5% band is an effective method for minimizing transaction costs.

Tax-Efficient Dividend Investing

A 15% withholding tax applies to US dividend ETF investments for Korean investors; however, the Korea-US tax treaty makes this relatively favorable compared to other countries. In SCHD's case, the majority of its distributions are classified as Qualified Dividends, enabling investors to benefit from preferential tax treatment. To maximize tax efficiency, it is advisable to prioritize investing through IRP or pension accounts first, and in taxable accounts to avoid trading around ex-dividend dates. Investment strategy should be formulated from an after-tax return perspective that comprehensively accounts for both annual dividend income and capital gains.

Conclusion

Dividend ETFs are an attractive option for investors seeking stable returns amid market uncertainty. Appropriately incorporating high-quality dividend ETFs like SCHD into your asset allocation can reduce portfolio volatility while securing consistent cash flow. We encourage you to regularly utilize an asset allocation calculator and rebalancing calculator to build a dividend investment strategy aligned with your individual investment goals and risk tolerance.

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SCHD's Investment Appeal

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