Is Now A Good Time To Invest In SCHD

Posted by More Dividends in Analysis On September 25, 2025

Introduction

In the world of investing, timing is always contested: no one can perfectly predict market moves, but some environments offer stronger odds for success than others. As of late 2025, there are a number of compelling arguments suggesting that now is a particularly good time to consider an allocation to SCHD — the Schwab U.S. Dividend Equity ETF. Below, I will present reasons grounded in valuation, yield, risk dynamics, macro outlook, and portfolio strategy that together make a persuasive case for investing in SCHD today.

What Is SCHD — A Quick Overview

Before delving into the “why now,” it helps to understand what SCHD is and what it seeks to accomplish. SCHD tracks the Dow Jones U.S. Dividend 100™ Index, which is composed of U.S. companies with a strong track record of paying dividends, combined with financial and quality screens.

The fund has an extremely low expense ratio of 0.06% (6 basis points) — making it one of the more cost-efficient dividend ETFs available.

It holds about 100 stocks (though “100” is a target rather than a strict cap) that meet criteria for dividend yield, dividend growth, cash flow strength, and debt metrics.

SCHD is commonly used by income-seeking or dividend-oriented investors, but because of its quality filters and disciplined methodology, it is often viewed as a high-quality dividend equity play rather than a speculative yield fund.

Over its history, SCHD has delivered solid returns. Its 5-year and 10-year annualized returns are competitive with many large-cap and dividend strategies.

Given that context, the question is: why would right now be a particularly attractive entry point?

Reason 1: Attractive Yield With Defensive Tilt

One of the strongest arguments in favor of buying SCHD now is that it offers a compelling dividend yield in a period when fixed income yields are under pressure or volatile. SCHD currently yields in the ballpark of 3.5% to 4% (depending on metrics and timing).

For many investors, that is meaningfully higher than what high-quality bonds, short-term treasuries, or cash equivalents are delivering after inflation and taxes.

Moreover, SCHD’s methodology tends to favor companies with stable cash flows, consistent dividend histories, and financial resilience. This gives it a more defensive tilt versus pure high-yield or speculative dividend funds.

In times when investors grow wary of growth stocks or high valuations, a yield-oriented but quality-screened strategy may offer a smoother ride.

Indeed, recently some analysts have noted that SCHD remains somewhat undervalued relative to growth-tilted indices, especially as the market over-emphasizes “hot” themes like AI or technology bubbles.

In other words, you may be able to get a durable yield plus upside potential, with somewhat less downside risk than taking speculative exposure in the frothy growth segments.

Reason 2: Valuation and Upside Potential

Another pillar of the “now is good” argument is the valuation backdrop and forward return potential. According to forecasts aggregated by TipRanks, the 12-month target for SCHD is around $30.63, implying about an 11.8% upside from current levels (given a recent price near ~$27.40). That suggests that the market sees room for price appreciation beyond just dividend yield.

Furthermore, as of late 2025, there is a narrative that many growth or tech names may be overextended — thus creating opportunities in more value- or income-oriented equities. Some commentators have flagged SCHD as undervalued in that context.

SCHD’s past performance also supports its appeal: over multi-year periods, it has delivered strong risk-adjusted returns and has been praised by analysts for its consistency and robustness.

That historical credibility gives some confidence that future returns may reward patient investors.

Reason 3: Rising Popularity of Dividend / Defensive Strategies

In 2025, amid economic uncertainty, many investors have shifted toward income-generating and defensive equity strategies — and dividend stocks have been part of that
That trend reinforces the idea that there is renewed investor appetite for the very kind of exposure SCHD offers.

When macro risks dominate — such as inflation risks, rate uncertainty, or geopolitical turbulence — dividend-paying, cash-flow-rich businesses often outperform more speculative high-growth ones. That environment makes SCHD relatively more attractive now than in a “risk-on” bubble.

Reason 4: Macro & Rate Cycle Positioning

The interest rate environment is crucial for dividend-oriented strategies. In general, rising rates tend to hamper yield strategies (because bonds become more competitive) and increase discount rates on dividends. But the market appears to be in a transitional phase, with speculation around rate cuts later in 2025 or 2026 as inflation softens and growth moderates.

If the Fed begins easing, equity valuations tend to respond favorably — and equities that offer income with stability are likely to benefit. Indeed, some recent pieces highlight SCHD among ETFs to consider ahead of expected rate cuts.

Thus, by entering now, investors may capture a near-term yield plus position themselves to ride a favorable rate environment shift if it materializes.

Reason 5: Risk Management and Diversification

SCHD offers a useful diversification and risk management tool in a portfolio. Because it is built on quality screens (e.g. free cash flow / debt, return on equity, dividend growth) rather than chasing high yields alone, it tends to avoid the most precarious yield traps.

In a diversified portfolio, SCHD can serve as a core or satellite holding—balancing exposure between growth and value/income segments.

Its substantial liquidity, relatively low volatility (compared to individual dividend names), and strong track record make it a practical choice for many investors seeking income without excessive risk.

Even if part of one’s thesis doesn’t fully play out (e.g. rate cuts are delayed or growth surprises), the income generated from dividends provides a cushion against capital volatility.

Risks & Caveats (to be balanced)

To be intellectually honest, no investment thesis is without risk. It is worth noting a few countervailing considerations:

Sector shifts / exposure risk: Recently, SCHD has increased its exposure to the energy sector (e.g. nearly doubling from ≈12% to about 21%) as part of its reconstitution.

While that can boost yield and upside when energy is strong, it also makes the ETF more sensitive to commodity cycles and energy volatility.

Market timing risk: Even if SCHD is “a good idea,” entering at a weak point or short-term drawdown is possible. Price momentum and technicals may lag.

Rate upside scenario: If interest rates rise further or if inflation surprises, yield strategies may suffer relative to fixed income or growth re-rating, especially if bond yields climb.

Dividend cuts: Should economic stress hit SCHD constituents, some companies may cut or suspend dividends. While the quality screens help mitigate exposure to weak dividend payers, no fund is immune.

For many investors, these risks are acceptable in light of the return and income potential — but they warrant consideration and appropriate sizing in a portfolio.

Conclusion

To sum up, now presents a favorable convergence of multiple factors for investing in SCHD:

The yield is attractive relative to many fixed income alternatives, and the quality tilt provides more resilience.

Valuation upside seems reasonable, with forecasts pointing to double-digit potential gains.

Market sentiment is shifting toward dividend/defensive strategies as uncertainty creeps in.

The interest rate cycle may be nearing a turning point favorable to equities.

SCHD offers a well-constructed, diversified, low-cost vehicle, making it a practical building block for many portfolios.

While no strategy is risk-free, and sector or rate surprises may introduce volatility, the balance of reward vs. risk appears stronger now than in many prior periods. If one is seeking a durable, income-plus-equity solution, allocating to SCHD today looks like a well-justified move in the current landscape.

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