Schwab's Dividend ETF Has Gained 25% This Year. Is It Still Worth Buying?

The Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD) is having one of its better years. At around $34 as I write, the fund has gained about 25% in 2026, far ahead of the S&P 500 (SNPINDEX:^GSPC), which is up about 13%.

This puts the fund about 3% under its Aug. 24 record close of $35.21. And for a fund that owns dividend payers instead of growth stocks, that's a big move. I think it also shifts what a buyer today can reasonably expect.

My estimate is that $10,000 put into the fund now, with every dividend reinvested, might be worth a little over $14,000 in five years. That comes to a return of around 7% a year -- decent, but far short of what 2026 alone has brought.

The estimate depends on two inputs: how fast the fund's payout grows, and how much investors pay for every dollar of it.

A pricier payout

Notably, the payout has barely budged in 2026. The fund's first three payments this year, including the one paid on Sept. 28, total around $0.78 per share, according to Schwab. That's only about 1% more than the same three payments in 2025.

The share price, though, has jumped. The fund ended 2025 at $27.43, and its payments for the year came to around $1.05 per share, for a yield of about 3.8%. Its last four payments still add up to about $1.05 now. But at around $34 per share, the yield is down to about 3.1%. The stocks in the fund also got pricier against their earnings. Schwab put the portfolio's price-to-earnings ratio at around 18 as of June 30 and about 20 as of Aug. 31.

Put another way, a buyer now pays around 24% more for every dollar of the fund's yearly income than someone who bought on the last trading day of 2025. Almost all this year's gain came from the higher price, not from bigger dividends.

How fast can the payout grow?

SCHD doesn't set its own dividend like a company does. It passes on the dividends paid by its 102 holdings, which tilt toward value stocks, minus an expense ratio of just 0.06%.

These holdings are chosen by an index that only lets in companies that have paid dividends for at least 10 years running. Still, even dividend payers with long records can slow their raises.

Showing that slowdown, the fund's yearly payout grew at an average rate of around 9% over the five years through 2025. In the last three of those years, the rate dipped to about 7%. And the past four payments are up only around 2% from the previous four.

I don't want to base a forecast on the earlier, faster pace when the trend has been slowing down. Instead, I'm assuming the payout grows around 6% a year through 2031, bringing it from about $1.05 per share to about $1.41. It's under the fund's three- and five-year averages, but it still gives the holdings credit for picking their raises back up after a quiet 2026.

Investors might pay a bit less for that income

The second input is valuation, which for a fund like this shows up in its yield. I'm assuming the fund yields around 3.4% in five years -- above today's 3.1%, but below the 3.8% it had when 2025 closed. For context, the yield averaged around 3.2% at the end of each of the last 10 years.

At a 3.4% yield, a $1.41 payout means a share price of around $41.50, or about 21% above today's price. Meanwhile, reinvesting the dividends along the way (before taxes) would turn the 292 shares that $10,000 buys today into around 343. Multiply the two, and the stake comes to a little over $14,000.

Of course, the yield is where the estimate can swing the most. If investors keep paying today's price for every dollar of income, the same $10,000 could reach around $15,600.

But if the yield rises back to where it was when 2025 ended, the result would be closer to $12,900. And that's with the payout still growing 6% a year.

In the end, I think a little over $14,000 is a fair estimate. It assumes the payout picks back up and that investors pay a bit less for it than they do today, and neither looks like a big stretch.

For investors who want a growing stream of income, I think the fund is still worth considering at this price. I'd just expect something closer to 7% a year over the next five years than a repeat of 2026.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.