Based on the FM Global Invest Risk-Reward Rating for ETFs, the Schwab U.S. Dividend Equity ETF (SCHD) reaches an 80 out of 100 overall score, indicating a Strong Buy rating for the ETF.
SCHD scores particularly well in the following categories:
- Cost Efficiency: 100 out of 100 Score
- Valuation: 100 out of 100 Score
- Expected Return: 100 out of 100 Score
- Downside Risk Protection: 92 out of 100 Score
The Schwab U.S. Dividend Equity ETF’s Score According to the FM Global Invest Risk-Reward Rating for ETFs
SCHD has been evaluated across 10 categories, comprising a total of 32 subcategories. Each subcategory receives a score from 0 to 5, which is internally weighted and scaled to calculate the corresponding 100-point category score. Each category score is then expressed on a 100-point scale.
Here you can explore the full methodology behind the FM Global Invest Risk-Reward Rating for ETFs.
How SCHD Scores Across Each Category Based on the FM Global Invest Risk-Reward Rating
ETF Strategy & Diversification Structure: 75 out of 100 Score
Due to SCHD’s consistent strategic focus and its strategy transparency, it receives an attractive 75/100 score in the ETF Strategy & Diversification Structure category.
Downside Risk Protection: 92 out of 100 Score
As a result of the Schwab U.S. Dividend Equity ETF’s focus on financially healthy companies that pay sustainable dividends, the ETF reaches the highest possible 5/5 score in the Recession Resilience subcategory.
Considering the Schwab U.S. Dividend Equity ETF’s significant dividend growth potential, the ETF further earns a 5/5 score in the Inflation Protection subcategory.
Financial Health of the ETF’s Top 10 Holdings: 68 out of 100 Score
- Average EBIT Margin [TTM]: 24.66%
- Average Return on Equity [TTM]: 67.85%
The ETF’s focus on financially healthy companies contributes to its attractive 68/100 rating in the Financial Health category.
Dividend Sustainability: 84 out of 100 Score
Given the Schwab U.S. Dividend Equity ETF’s focus on companies that pay sustainable dividends, the ETF receives an 84/100 score in the Dividend Sustainability category.
In the subcategories 5-Year Dividend Growth Rate (which stands at 10.87%), 10-Year Dividend Growth Rate (10.77%), and Dividend Safety, the ETF reaches the highest possible 5/5 score.
Cost Efficiency: 100 out of 100 Score
Due to the Schwab U.S. Dividend Equity ETF’s low Expense Ratio of 0.06%, the ETF receives the highest possible 100/100 score in the Cost Efficiency category, indicating that the ETF is highly cost-efficient compared to its peers.
Risk Profile & Volatility: 50 Out of 100 Score
In the category Risk Profile & Volatility, the ETF earns a 50/100 score. This reduced score when compared to other categories is primarily a result of the ETF’s elevated 5-Year Tracking Error of 9.78%.
Valuation: 100 out of 100 Score
With a current Average Price/Earnings Ratio of 16.21, the Schwab U.S. Dividend Equity ETF has a significantly lower Valuation when compared to the S&P 500, which currently exhibits an Average Price/Earnings Ratio of 27.99.
Due to this attractive Average Price/Earnings Ratio, the Schwab U.S. Dividend Equity ETF reaches an excellent 100/100 score in the Valuation category.
Innovation: 60 out of 100 Score
In the subcategories Innovative Exposure of Top 10 Holdings and Strategic Alignment of Top 10 Holdings with Megatrends, the ETF receives a 3/5 score each, which results in a 60/100 score in the Innovation category.
Performance: 70 Out of 100 Score
Owing to the Schwab U.S. Dividend Equity ETF’s 5-Year Total Return of 87.35% and its 10-Year Total Return of 194.80%, the ETF achieves a 70/100 score in the Performance category.
Expected Total Return: 100 Out of 100 Score
In addition to its Cost Efficiency and its attractive Valuation, the Schwab U.S. Dividend Equity ETF also stands out due to its attractive Expected Total Return. The expected Total Return is calculated as the sum of the ETF’s Dividend Yield and the expected average earnings per share growth rate of the ETF’s top 10 holdings.
In this category, the Schwab U.S. Dividend Equity ETF reaches the highest possible 100/100 score, which significantly contributes to the ETF’s attractive overall rating.
Strategic Alignment with The Dividend Income Accelerator Portfolio
The Schwab U.S. Dividend Equity ETF is our largest position within The Dividend Income Accelerator Portfolio, our actively managed dividend portfolio. The ETF significantly contributes to the portfolio’s:
- Attractive dividend income.
- Strong potential for dividend growth.
- Capacity to provide sustainable dividend income.
- Reduced Volatility.
- Extensive Sector Diversification.
Who Should Consider Investing in SCHD?
- Investors who want to generate dividend income and who want to increase this amount on an annual basis.
- Investors who want to invest for retirement.
- Long-Term investors who aim to combine income and dividend growth.
Key Risks to Monitor
- Low geographical diversification due to the ETF’s focus on U.S. equities.
- Reduced Sector Diversification: no exposure to the REIT Sector.
Key Investor Takeaways
- Score according to the FM Global Invest Risk-Reward Rating for ETFs: 80 out of 100
- Rating: Strong Buy
- Valuation: Average Price/Earnings Ratio of 16.21
Conclusion
Due to its top scores in Cost Efficiency, Valuation, Expected Return, and Downside Risk Protection, SCHD earns an 80/100 overall rating.
The FM Global Invest Risk-Reward Rating for ETFs indicates a Strong Buy rating for the Schwab U.S. Dividend Equity ETF, underscoring its very attractive risk-reward profile.
Learn More About the Methodology Behind the FM Global Invest Risk-Reward Rating
- Discover the methodology behind the FM Global Invest Risk-Reward Rating for ETFs.
- Here you can find a detailed explanation of the FM Global Invest Risk-Reward Rating for individual companies.
Learn How Individual Companies Are Evaluated Using the FM Global Invest Risk-Reward Rating
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- Discover our latest rating and analysis on LVMH.
- Here you can find our latest analysis on PepsiCo.
Source: FM Global Invest, data from Morningstar and Seeking Alpha.
Disclosure: We hold a long-term position in SCHD.
