Today is Dividend Day.
The series where I teach you 5 things about dividend investing in less than 5 minutes.
1️⃣ SCHD Shifts to Tech
The Schwab U.S. Dividend Equity ETF (SCHD) rebalances its portfolio every quarter to make sure no single stock or sector exceeds its index caps.
The latest Q3 rebalance involved a sharp rotation back into Technology, increasing the sector's weight from 8.90% to 12.00%.
Health Care got trimmed from 20.99% down to 18.77%.
Individual stocks saw some big moves too:
QCOM went from #18 to become the #1 holding at a 4.74% weight
TXN went from #12 to the #2 spot at 4.41%
2️⃣ Amazon Takes the Top Spot for Revenue
For years, Walmart sat at the top of the global revenue chart.
But things are always changing as shown by the image that tracks the top companies by revenue from 2020 to 2026:
After holding the #1 spot for over half a decade, Walmart dropped to #2 ($713B), as Amazon ($717B) climbed to #1 all the way from #9 ($281B) back in 2020.
3️⃣ An Investing Quote
Markets, sectors, and companies are constantly in motion.
Whether it’s a dividend ETF like SCHD rotating its weightings, or the biggest companies in the world changing position in the revenue rankings, most things change.
“Nothing goes in one direction forever… Cycles always prevail eventually… Just about everything is cyclical.” — Howard Marks (The Most Important Thing)
4️⃣ SCHD’s Strategy
SCHD has performed very well since its inception in 2011, retiring more than 13% per year on average.
That makes its strategy worth studying.
Starts with the Dow Jones U.S. Broad Market Index and requires companies to have at least 10 consecutive years of dividend payments
Ranks eligible stocks by dividend yield and discards the bottom 50%
Selects the top 100 stocks based on a composite score of cash flow-to-total debt, return on equity (ROE), indicated dividend yield, and 5-year dividend growth rateF
Holdings are market-cap weighted with limits for single stocks and sectors
Click here to read the SCHD Strategy Insights paper.
5️⃣ Example of a Dividend Stock
Qualcomm moved up to the #1 spot in SCHD.
They design and sell semiconductor chips for smartphones and connected devices, and collect royalty fees by licensing wireless technology patents.
Key numbers from Fiscal.ai:
Profit Margin: 21%
Forward PE: 21.8x
Dividend Yield: 1.8%
Payout Ratio: 41.3%
Used sources
Interactive Brokers: Portfolio data and executing all transactions
Fiscal.ai: Financial data
P.S.
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Great reminder of SCHD’s strategy and how and why they construct their portfolio.