This ETF is driven by oil.
One of the largest and well-liked ETFs concentrating on dividend stocks is the Schwab US Dividend Stock ETF (SCHD), which has provided an impressive income yield of about 3.5% over the last year. Historically, it has also shown strong returns.
Last year, though, it didn’t perform as well, delivering only a 0.4% return. However, by early 2026, it rebounded strongly, jumping nearly 15%—well outpacing the S&P 500. This year, the increase has been under 1%. So, one might wonder, what fuels this superior performance?
Hidden Fuel Source
The Schwab US Dividend Stock ETF tracks the Dow Jones US Dividend 100 Index, which aims to capture the top 100 dividend-paying stocks. Companies are assessed based on various factors, including their dividend yield and growth over the last five years.
The fund’s 100 holdings offer quite broad exposure to the stock market—though it’s worth noting, the energy sector has a hefty allocation of about 19.9% as of the end of last year, which is the biggest sector for the fund. Last year, earnings suffered as oil prices dipped, negatively impacting its performance.
But this year is a different story. Oil prices surged by 15% globally, reaching over $70 a barrel. Factors like potential supply disruptions in Venezuela and Iran have contributed to this climb. Interestingly, concerns are growing regarding tensions between the US and Iran, as well as recent arrests in Venezuela.
High Dividend Stocks in Crude Oil
Rising oil prices have given this ETF a boost, especially since two of its significant holdings are oil companies. For instance, Chevron (CVX) accounts for 4.21% of the fund and is its fourth-largest holding. Similarly, ConocoPhillips is in sixth place, with a 4.19% stake. Both companies have seen substantial gains this year. Other meaningful holdings include S.L.B. (2.7% of the fund), EOG Resources (2.36%), and Valero Energy (2.19%).
It’s important to clarify, though, that the reason Schwab U.S. Dividend Stock ETF includes these energy firms isn’t simply due to the recent oil rally—these stocks are genuinely solid dividend payers.
For example, Chevron raised its dividend by 4% recently, extending its growth streak to 39 years (which is notably one of the longest in the industry). On average, Chevron’s dividend has increased by 6% per year over the last five years, outpacing the S&P 500’s growth rate of 5%. Its current yield stands at 3.9%, significantly higher than the S&P 500’s 1.2%. This combination of high yield together with robust growth is a sweet spot for the ETF.
ConocoPhillips is also in a good position with a yield of 2.9% and an 8% dividend hike announced at the end of last year. The company’s goal is to achieve dividend growth that ranks within the top 25% of S&P 500 firms.
Both companies should have sufficient resources to continue their dividend increases. Chevron anticipates its free cash flow will grow over 10% annually through 2030, assuming oil prices remain around $70 per barrel. Meanwhile, ConocoPhillips expects a significant jump in free cash flow by $7 billion by 2029, nearly doubling from last year, which should support further dividend increases.
Oil Dividend
There’s a plethora of high dividend stocks in the oil sector, which is why the Schwab U.S. Dividend Stock ETF has a substantial weight in this area. The rise in oil prices this year has positively impacted its performance. Investors in this dividend ETF could see benefits from increased dividends stemming from its energy holdings, potentially leading to high returns for the long haul.
