Why is SCHD crashing in 2025? Time to SELL or DOUBLE DOWN?!

Summary

SCHD, a dividend-focused ETF, is currently down due to external factors like a downturn in the energy sector and economic uncertainty. However, it's considered undervalued with a fair value closer to $30, offering an attractive buying opportunity under $25. Despite the short-term downturn, SCHD has a solid history of long-term growth, with an average annual return of 13.13%. Its high dividend yield of 4.16% and consistent dividend growth make it a valuable asset for long-term investors seeking passive income. For those invested in or considering SCHD, now is a prime time to buy or hold, capitalizing on its potential upside.

Takeaways

• 😀 SCHD is currently undervalued at under $25, with analysts estimating its fair value closer to $30, offering a 20% upside.
• 😀 SCHD has a solid dividend yield of 4.16%, which is especially valuable during market downturns, providing investors with passive income without needing to sell principal assets.
• 😀 SCHD's most recent dividend increased by 22% in the first quarter of 2025 compared to March 2024, highlighting its growth potential.
• 😀 While SCHD is down in the short term due to broader market conditions, its long-term performance has been strong, with a 13.13% annual return since 2011.
• 😀 The ETF's diversification across sectors like energy, consumer staples, healthcare, and industrials contributes to its resilience, even during market volatility.
• 😀 SCHD's recent sector reconstitution, which increased energy stock exposure, may lead to short-term challenges due to low oil prices, but could also offer future upside as the market recovers.
• 😀 SCHD’s underlying assets, though down in the current market, are considered undervalued by analysts, with potential for strong growth as the economy stabilizes.
• 😀 Over the long term, SCHD’s dividend growth rate has averaged 11.6% annually, making it an attractive choice for income-focused investors.
• 😀 A hypothetical $10,000 investment in SCHD today, with monthly contributions of $1,000, could grow to nearly $900,000 in 20 years, providing $3,000 per month in dividends.
• 😀 Despite current market uncertainty and fear surrounding tariffs and potential recession, SCHD remains a solid investment for those with a long-term horizon and a focus on dividend income.
• 😀 For investors nearing retirement, holding onto SCHD without panic selling and continuing to collect dividends is a smart strategy, especially with SCHD’s history of consistent dividend growth.

Q & A

What is SCHD and why is it considered a good investment?

SCHD is an exchange-traded fund (ETF) that focuses on high-dividend-paying U.S. stocks, particularly in sectors like energy, consumer staples, and healthcare. It's considered a good investment due to its consistent dividend growth, strong long-term returns, and ability to provide passive income, especially in volatile markets.

What is the fair value of SCHD according to professional analysts?

Professional analysts have described SCHD’s fair value as closer to $30. Currently, it’s trading below $25, which presents an opportunity for investors looking for an upside of about 20%.

How has SCHD’s dividend been performing recently?

SCHD recently increased its dividend by 22% compared to the March 2024 payout. The current dividend yield is at 4.16%, which is considered quite high.

Why is having dividend-paying assets like SCHD important for investors?

Dividend-paying assets like SCHD are crucial for investors who rely on their investments for income. Instead of selling off portions of the portfolio to access cash, these dividends allow investors to live off the income without touching the principal, which is especially valuable in a down market.

How has SCHD’s performance been affected by recent market conditions?

SCHD, like other ETFs, has been impacted by market downturns, especially in sectors like energy and technology. However, its long-term returns have been robust, and it still provides a solid dividend income even in tough market conditions.

What sectors have contributed to SCHD’s recent performance decline?

SCHD has seen a decline due to exposure to sectors like energy, materials, real estate, and technology, which have all been performing poorly. Energy, in particular, has suffered due to falling oil prices and tariffs.

What changes did SCHD make during its annual reconstitution?

During its annual reconstitution, SCHD increased its energy stock exposure to 21% from 12% and removed some financial stocks from its portfolio. This shift could make the ETF more vulnerable to fluctuations in energy prices, especially in the current environment of falling oil prices.

Why is the current drop in SCHD seen as an opportunity?

The drop in SCHD is seen as an opportunity because, despite the overall market downturn, SCHD’s underlying assets are undervalued. The current price presents a chance for investors to buy at a lower price, with the potential for significant growth as the market stabilizes.

What is the expected dividend growth for SCHD in the future?

SCHD’s five-year average dividend growth rate is 11.6%, and although this figure might be adjusted down to 8% for conservative estimates, it still represents strong growth potential for investors looking for income over the long term.

How can investors benefit from investing in SCHD now during the market downturn?

Investors can benefit from the low price of SCHD during the downturn by purchasing shares at a discount. This not only offers the potential for capital appreciation when the market recovers but also locks in a high dividend yield, which will provide consistent income even in uncertain times.