The Truth About SCHD's Underperformance - US High-Dividend Stocks Aren't All Struggling

🎯 Why Is SCHD Underperforming So Much?

With only one month left in 2025, SCHD hasn't shown any significant recovery. Year-to-date total returns are just over 3%, which is actually worse than US short-term bond ETFs—essentially risk-free assets.

📊 SCHD's Last 3 Years of Performance

Comparing S&P 500 and SCHD year-by-year, SCHD has underperformed for 3 consecutive years. 2025 is shaping up to be as disappointing as 2023.

Year	S&P 500	SCHD	Difference
2023	High	Weak	S&P 500 wins
2024	High	Weak	S&P 500 wins
2025 (YTD)	High	~3%	S&P 500 dominates

💰 Korean Investors' SCHD Exposure

There are 11 SCHD-related ETFs listed in Korea with 5.4 trillion KRW in assets. Add the 3.2 trillion KRW directly held by Korean retail investors, and nearly 10 trillion KRW is tied up in SCHD.

When an ETF has this many holders, it needs to perform well. That's how investors take profits and reinvest in other ETFs, creating a virtuous cycle.

⚠️ SCHD = US Dividend Stocks? That's a Misconception

There are many high-dividend and dividend-growth ETFs in the US. However, Korean investors have equated "US dividend stocks = SCHD" due to its overwhelming popularity.

💡 Key Point: SCHD is underperforming. US high-dividend stocks as a whole are not.

📈 Other High-Dividend ETFs' Performance

Only SCHD and SDY have single-digit returns YTD. SDY is at 7.6%, so it's awkward to group it with SCHD's 3%.

Most other dividend ETFs have double-digit returns. While they underperform S&P 500 in absolute terms, dividend ETFs aren't meant to beat the index—double-digit returns are excellent.

🤔 Why Has Interest in US Dividend Stocks Declined?

Talking to investors, I feel that preference for US dividend stocks is at an all-time low. Why?

1️⃣ Loss of Yield Advantage

• US short-term bond ETFs offer 4% income
• Korean high-dividend ETFs also expect 4%+
• Tax changes reduced after-tax dividend yields

2️⃣ Growth Stocks' Overwhelming Performance

• Big Tech and semiconductor stocks are crushing it
• Even crashes eventually recover (2022, early 2025)
• "Crashes are opportunities" mindset spreading

3️⃣ Reduced Need for Downside Protection

• US high-dividend stocks' advantage was downside protection
• But investors no longer fear market drops as much
• Fewer people see the need for dividend stocks during corrections

✅ US High-Dividend Stocks Are Still Necessary

I love growth stocks too. I love Big Tech and semiconductors. I believe portfolios should have significant growth stock exposure.

But US high-dividend stocks are definitely necessary.

Investors have different goals and time horizons, so diversification is essential. US high-dividend ETFs with different characteristics from Big Tech/AI are definitely needed.

📌 SCHD's Rebalancing Issue

After the April 2025 rebalancing, energy sector weight rose above 20%. Energy stocks are sensitive to oil prices, and the oil outlook is negative for this year and next.

• Goldman Sachs: Negative outlook
• JP Morgan: Negative outlook
• OPEC: Mentions demand decline

🎯 Conclusion: No Reason to Stick Only with SCHD

If you want to stick with SCHD, treat this as a chance to increase your position. If you're concerned about volatility and underperformance, diversify into other high-dividend ETFs beyond SCHD.

Until last year, Korean investors had no choice but Korean versions of SCHD. Now there are various options. Just as you compare Big Tech and semiconductor ETFs before investing, approach US high-dividend ETFs the same way.

In the next article, I'll introduce notable alternatives to SCHD.