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Investment Strategy2026-02-09
SCHD Dividend ETF Outperforming Tech
Dividend ETFs have staged a multi-year comeback since November 2025, reversing years of underperformance against AI-driven tech stocks. SCHD is up 14.73% year-to-date, far outpacing QQQ, which is down 0.76%.
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Beginning in November 2025, market leadership in U.S. equities shifted. SCHD (Schwab US Dividend Equity ETF) has risen 14.73% year-to-date in 2026, trading near its 52-week high of $31.49, while QQQ has declined 0.76% over the same period. As the AI frenzy cools, dividend stocks backed by solid cash flows are drawing renewed attention.
Breaking Down SCHD's Impressive Performance
SCHD currently trades at $31.47 with assets under management of $81.95 billion. Its defensive characteristics stand out: a dividend yield of 3.33%, P/E ratio of 17.46x, and beta of 0.74. The fund provides diversified exposure to 101 high-quality dividend-paying companies while charging a razor-thin expense ratio of just 0.06%. Analysts have issued strong buy recommendations on SCHD, calling it a 'defensive hedge amid geopolitical uncertainty and market volatility.' Reviewing dividend stock allocations in an asset allocation calculator reveals that most investors are significantly underweight this sector.
What the SCHD vs. QQQ Return Gap Means
The year-to-date return gap between the two ETFs has reached approximately 15.5 percentage points. In a high-interest-rate environment, dividend stocks that generate cash today are preferred over growth stocks that depend on future cash flows. The valuation disparity is also stark — QQQ trades at a P/E of 32.09x versus SCHD's 17.46x. TQQQ, which triples the moves of its underlying QQQ, has seen even steeper losses as a result. Using an asset allocation calculator to examine growth-stock bias in your portfolio is increasingly important.
Comparing a Range of Dividend ETFs
VYM (Vanguard High Dividend Yield ETF) focuses on large-cap stocks with above-average dividend yields, while VIG (Dividend Appreciation ETF) invests in companies that have grown their dividends for at least 10 consecutive years. NOBL (Dividend Aristocrats) applies the strictest criteria, holding only companies with 25+ consecutive years of dividend growth. JEPI and JEPQ use covered-call strategies to deliver high distributions but cap upside in bull markets. A rebalancing calculator can help determine the appropriate weight for each of these ETFs in your portfolio.
Dividend Reinvestment and the Power of Compounding
The true power of dividend ETFs lies in their long-term compounding effect. Reinvesting SCHD's 3.33% dividend yield unlocks a dual benefit — price appreciation combined with dividend growth — that significantly boosts long-term total returns. Drawdowns during bear markets are also smaller than the broad market average, providing superior downside protection in times of crisis. Pairing SCHD with the income from AGG ETF's bond interest creates a stable, income-generating portfolio. Even after accounting for the 15% U.S. withholding tax on dividend income, the long-term compounding advantage remains overwhelmingly compelling.
How to Build a Dividend-Focused Portfolio
One allocation worth considering is: SCHD 30%, VOO 30%, AGG ETF 20%, GLD 10%, and cash 10%. Between TLT and IEF, many professionals prefer IEF given current interest rate uncertainty. The disciplined approach is to set target weights using an asset allocation calculator, then use a rebalancing calculator each quarter to realign allocations — enabling a rule-based dividend investing strategy that stays on course regardless of market conditions.
Conclusion
SCHD's 14.73% return significantly outpacing QQQ signals a broader shift toward cash-flow-based investing. The most effective strategy at this juncture is to use an asset allocation calculator to bring dividend stock exposure up to an appropriate level, supplemented by AGG ETF for added stability — all kept on track with a rebalancing calculator.
