This ETF may generate solid total returns well into 2026 and beyond.
I own a handful of exchange-traded funds (ETFs). To me, these funds really complement my individual stock portfolio. They offer an extra layer of diversification that helps me reach my financial goals.
One of the ETFs I’m looking to invest more in during 2026 is the Schwab US Dividend Stock ETF. It’s among the largest ETFs focused on dividend stocks, which is why I’m excited to buy more shares of it.
Best Dividend ETF
The Schwab US Dividend Stock ETF follows a straightforward investment strategy: it aims to track the Dow Jones US Dividend 100 Index, which measures the performance of the top 100 dividend stocks. Companies are screened based on various dividend quality traits, including dividend yield and a five-year dividend growth rate.
Currently, one of the fund’s largest holdings is Bristol Myers Squibb, with an allocation of 4.2%. This pharmaceutical giant offers a high-yield dividend—around 4.7%—that has increased consistently over the years. Recently, they raised their payout by 1.6%, marking 17 consecutive years of growth. They’ve paid dividends for 94 straight years.
Lockheed Martin is also one of the top holdings (currently third with a 4.1% allocation). This defense contractor has a dividend yield of 2.8%. In October, they increased their dividend by 5%, continuing a streak of 23 years of hikes.
The index the Schwab fund tracks is reorganized each year to ensure it reflects the top 100 dividend-paying stocks. When it last adjusted in March, the fund’s average holdings boasted a dividend yield of 3.8%, with payouts growing at an average of 8.4% annually over the past five years. This setup provides a nice balance of current income and potential growth.
Attractive Investment
The Schwab U.S. Dividend Stock ETF didn’t perform particularly well last year. The fund only rose about 1% in 2025, which is quite a bit lower than the S&P 500’s gain of over 17%. Because of this, the fund appears relatively attractive compared to the broader market. Its average annual return is around 17 times, with a dividend yield of 3.7%, while the S&P 500 has a higher return but a lower yield. The valuations in the market are currently above historical averages, while dividend yields are at record lows.
I believe the Schwab US Dividend Stock ETF can deliver higher returns moving forward. This perspective aligns with its historical performance and the trends of growth-oriented dividend stocks.
Since its launch in 2011, the Schwab U.S. Dividend Stock ETF has averaged an annual return of over 10% across the last three, five, and ten-year periods, which aligns well with the long-term performance of dividend growth stocks. According to reports, high-dividend growth stocks in the S&P 500 have averaged a return of 10.2% over the past 50 years.
So while many dividend stocks had a rough year in 2025, I don’t think that’s going to set a precedent. I expect returns to align with historical averages in the long run. This should bode well for the Schwab U.S. Dividend ETF, given that it holds high-quality, high-dividend growth stocks.
Looking Ahead
The Schwab U.S. Dividend Stock ETF comprises 100 high-yield companies known for increasing their dividends. This structure can offer me a growing and reliable income source. Also, since it trades at a much lower valuation compared to the S&P 500, it seems like an even more appealing investment now, especially after a disappointing 2025. That’s one of the reasons I plan to heavily invest in this top ETF in 2026.
