SCHD ETF price: Good ETF but technicals are worrying
- SCHD is a large dividend-focused exchange-traded fund (ETF).
- It has a cheap expense ratio of 0.06% and over $46b in assets.
- Technicals suggest that the ETF could continue falling in the near term.
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The SCHD ETF price plunged to the lowest point since January 20 as treasury yields rose. It was trading at $75, which was about 4.65% below the highest level this year. In all, the index has retreated by about 1% this year while the Nasdaq 100 and S&P 500 have risen by ~11.08% and ~4.4%, respectively.
Investing in dividend stocks
The financial market is going through a major reset as concerns about the Federal Reserve remains. Minutes published on Wednesday confirmed fears that many Federal Reserve officials favored a 0.50% rate hike in its first meeting of the year.
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Therefore, there is a likelihood that the Fed will maintain its hawkish tone going forward. Some economists believe that the Fed’s terminal rate will be between 5.35% and 5.75%. Therefore, in this case, we could see blue-chip dividend stocks do better than growth-oriented ones.
The Schwab US Dividend Equity ETF, popularly known as SCHD, is one of the best dividend ETFs to invest in. It is a low-cost fund with an expense ratio of 0.06% and over $46 billion in assets. The fund tracks the well-known Dow Jones Dividend 100 Index. Its top competitors are JP Morgan Equity Premium Income (JEPI) and the Vanguard Dividend Appreciation ETF.
SCHD tracks many blue-chip companies that have demostranted many years of dividend growth. In most cases, companies in the fund are in the industrial, pharmaceutical, and consumer staples. Some of the top names in the fund are Broadcom, Verizon, Cisco Systems, Merck, and Lockheed Martin. Others are Texas Instruments, PepsiCo, Coca-Cola, and Home Depot.
Why invest in SCHD?
There are three main reasons why the SCHD ETF is one of the best ones to hold in an era of uncertainty. First, the fund holds some of the most quality companies in Wall Street, with its top constituents having investment-grade rating.
Second, the fund has a strong track record of dividend growth. Data compiled by SeekingAlpha shows that it has paid and grow dividends in the past 10 years. It has a three-year dividend growth CAGR of 14%, which is higher than comparable funds. Further, it has strong momentum, having outperformed the median of all ETFs in most gauges.
Finally, as shown below, the ETF has a quant rating of Buy, with most of its scores being A and above. Its momentum score is A while its low expense ratio gives it an A+ rating. Dividends and liquidity are A+, with the only B+ being risk.
SCHD stock price forecast
The only risk for investing in SCHD ETF is based on technical analysis. On the daily chart, we see that the fund has moved below the important support level at $76.74, the highest point in September last year. The shares have formed a symmetrical triangle pattern. It has now moved below the triangle pattern.
The shares have also moved below the 23.6% Fibonacci Retracement level. At the same time, the stock has moved below the 25-day and 50-day moving averages. Therefore, there is a likelihood that the shares will continue falling as sellers target the 50% retracement point at $72.12.