Speaker holds SCHD via monthly DCA; thesis is that its rising income (~3.13% yield, 11% growth) and cheaper valuation vs. tech provide suitable risk-adjusted returns for long-term capital preservation and cash generation.

So today I'm going to show you exactly what SCD is, what it holds, and why it's beating everything right now, whether it's continue, and what I'm personally doing about it every single month.

So here's what's going on. SCHD is up over 26% this year on price alone. But if you also reinvest the dividends, the total return jumps past 30%. Almost 4% extra just from compounding that cash flow.

Now, earlier this year, they removed 22 stocks from the ETF and brought in 25 new ones. That is a 30% turnover. They completely changed the DNA of this fund. This is not the same ETF it was last year, and it's paying off.

So, real quick, if you don't know what SCD is, it is the Schwab US Dividend Equity ETF. An ETF is just a basket of stocks that you can buy as one single investment, one single ticker symbol.

This ETF holds about 103 companies with a total expense ratio of 0.06%. So what does that mean? It means for every $10,000 you invest, you're only charged $6 per year.

Now, if you're interested in learning more about dollar cost averaging like I do every month in SCHD, we have an absolutely free PDF. Now, look at these numbers. SCHD's total return this year, 30.48%.

48%. QQQ 16.41%. SPY 12.89%. A dividend ETF is more than doubling the S&P's return and being the NASDAQ by also almost double. And here's what makes it even crazier. SCD dividends are adding almost 4% on top of its price return.

QQQ's dividend far below 1%. So, not only is it winning on price, it's pulling away even further when you cut the cash that it's paying you.

Let me show you what this actually looks like on a chart. So, guys, as you can see, what I did here was I pulled up SCD, the S&P 500, and QQQ. I eliminated the dividend completely, which is a huge advantage for SCHD.

It gets rid of a big chunk of the returns. And look at this. This is year-to- date. SCHD is almost at 28% not including dividends. You add dividends in there, it's pretty close to 30%. QQQ is at 16% and the S&P 500 is at 12%.

So now you've seen the numbers. SCHD is crushing it. But the question is why? Why is a dividend ETF outperforming the biggest tech funds on the planet?

SCHD is currently sitting at a forward PE of between 15 a.5 and 18. So you're paying $18 on the high side for every $1 of next year's earnings. That is a massive gap, guys. And when stocks get that expensive, eventually the market says, "I'm not going to pay that anymore."

Now, it seems hard to believe that because every single year the market keeps paying. But that's exactly what's happened here.

And SCHD holds 0% of those tech stocks weighing down the broader market. It was completely immune to the tech cool down. While those names were falling or stalling, at CHD holdings were running with nobody holding them back.

During the 2020 crash, SCHD dropped 33%. That's almost as much as the S&P 500 did. So, don't think that just because it pays dividends that it can't go down. It can, and it will.

I think now based on our big difference in valuation between normal companies and the hype, I do think SCHD will fall a lot less than QQQ or SPY overall. Guys, the reason it can do all this is because of how the fund picks its stocks.

It's not some guy to death picking his favorites. It runs on a strict four factor system. Strong cash flow compared to its debt, high return on equity, a meaningful dividend yield, and consistent dividend growth over 5 years.

If you fail, you're out. The system doesn't care about hype. It doesn't care about momentum. It only cares about the fundamentals. And in a year where fundamentals could actually matter, that system is winning.

And this isn't some small niche fund anymore, guys. CHD has over $112 billion in assets. That means tight spreads, high volume, and you can buy or sell whenever you want without overpaying.

This is a legit institutional-grade fund that any investor can own.

Can SCHD keep beating QQQ and the S&P 500?

SCHD has to have that problem. So, every time money flows out of overpriced tech, SCHD is sitting right there to catch it. I actually do agree with that. This is something that's to me very obvious about investing.

Meanwhile, the types of companies that SCHD holds, healthcare, financials, consumer staples, have gone from negative earnings growth to positive 9%. That gap used to justify paying 30 times earnings for a tech stock, but that's shrinking fast.

And when the earnings growth is comparable, but you're paying 18 times forward earnings instead of 27, as I had said earlier, the math starts favoring the cheaper fund. Elements of that I do agree with.

But at the end of the day, 15% is still better than 9% earnings growth. And if you do that long enough, if that were to stay for a long period of time, it would more than justify that difference in valuation.

SCHD's yield right now is about 3.13%. And guys, it was almost 4% since before this recent runup. And historically, its dividend has grown about 11% a year. So, you're not just getting paid today, you're getting paid more every single year.

That combination of rising income plus price appreciation is what turns a so-called boring fund into a total return machine when the market gets choppy.

And here's the risk. When tech eventually finds its footing and rips again, SCHD holders could be watching QQ Clue fly right past them once again. That's a real tradeoff.

This is not the first time SCD had a great year. It outperformed during the 2022 tech sell-off as well, but then tech came beyond roaring back and CHD fell behind again. I still don't get why 30-some year old people who aren't independently wealthy would own SCHD.

But maybe people just like getting that check every single month. And if you put it in an IRA or 401k, it can compound taxfree.

Number three, the tax problem. SCHD pays you dividends every quarter. That sounds great until you realize that if you hold this fund outside of a tax advantaged account like a Roth IRA or 401k, you're paying taxes on those dividends every single year whether you want to or not.

And this is after the company already paid taxes on its earnings and cash flow. So it is double taxation.

Over 20 or 30 years, that tax drag on CHD can eat it way at a meaningful chunk of your returns unless you have it in a tax advantage account. So where you hold this fund matters a lot and also if it hits your goals.

And look, guys, having your money in an ETF like CHD, SPY, or even a little QQQ, that's smart.

Now guys, as I said earlier, I own SCD. I believe it fits for my long-term goals. I have been fortunate enough financially where generating extra cash from dividends and getting a little capital return is very important to me. That's why it works.

Came back to me a day later, he goes, "Why not SCHD?" And the funny part was I was at the time I was criticizing people on the internet for saying that they were dividend investors and buying SCD.

And I still stand by that, but it fit my goals. He's like, "Paul, your goal is a little bit of capital appreciation, but dividends to fund to to fund your lifestyle. That's what this does."

And I was like, "Perfect. Let's do it." And I've been dollar cost averaging ever since.