SCHD's 3.25% yield Vs. High Treasury Rates: Is The Dividend ETF Still Worth It?

The popular Schwab US Dividend Equity ETF (NYSE:SCHD) is firing on all cylinders this year. It recently surged to a record high, is beating the blue-chip S&P 500 Index, and is experiencing billions of dollars in inflows. So, is SCHD still a good investment in an era where government bonds are paying over 4%?

SCHD ETF Stock is Soaring, and Inflows are Jumping

Data shows that the Schwab US Dividend Equity ETF has added over $9.8 billion in assets this year. It has experienced just one week of outflows this year, even as US government bond yields remain at elevated levels. 

The two-year Treasury yield stood at 4%, while the ten-year yield was 4.437%. Both figures are higher than SCHD's dividend yield of 3.25%. As such, if things remain the same, investing in US bonds should offer a higher return than SCHD. 

Still, the SCHD ETF stock has continued doing well this year. Its total return so far this year stands at nearly 20%, while the S&P 500 Index has jumped by over 11.25%. Its performance is nearly the same as that of the tech-heavy Nasdaq 100 index, which has jumped by 20%.

This performance is notable because the fund has minimal exposure to the rapidly growing artificial intelligence industry. Consumer staples make up 20% of the fund, while healthcare, energy, and industrials collectively account for 46% of its holdings.

Its only major technology companies are Qualcomm (NASDAQ:QCOM) and Texas Instruments (NASDAQ:TXN), which have jumped by 45% and 75% this year, respectively.

SCHD Stock Offers Better Growth Than Government Bonds

On paper, US government bonds offer better income than SCHD and other popular dividend ETFs. For example, a $10,000 investment in the ten-year bonds should bring in $445 in payouts, higher than SCHD's $325. 

However, in reality, the SCHD ETF offers more than bonds. It is made up of 100 blue-chip companies that may continue doing well in the coming years. As such, its total return will mostly be better than what government bonds are paying. 

A good example of this is what happened in the last five years, when the SCHD ETF returned 51%. An investment in government bonds returned much lower than that. $10,000 invested in ten-year bonds five years ago would have brought in $800 in interest. 

Technicals Suggest That the SCHD Stock Has More Upside

The daily chart suggests that the Schwab US Dividend Equity ETF has more upside in the near term. It has formed a cup-and-handle, which is a common bullish continuation sign. 

The stock has remained above the ascending trendline that links the lowest swings since April last year. It has also moved above the 50-day and 100-day moving averages. 

Therefore, the SCHD ETF will likely continue rising as bulls target the key resistance level at $35, followed by $40.

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