If you're interested in broad exposure to the Large Cap Value segment of the US equity market, look no further than the Schwab U.S. Dividend Equity ETF (SCHD), a passively managed exchange traded fund launched on 10/20/2011.

The fund is sponsored by Charles Schwab. It has amassed assets over $61.20 billion, making it the largest ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

Value stocks are known for their lower than average price-to-earnings and price-to-book ratios, but investors should also note their lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.06%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 3.47%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Financials sector--about 18.30% of the portfolio. Healthcare and Consumer Staples round out the top three.

Looking at individual holdings, Lockheed Martin Corp (LMT) accounts for about 4.53% of total assets, followed by Abbvie Inc (ABBV) and Coca-Cola (KO).

The top 10 holdings account for about 41.23% of total assets under management.

Performance and Risk

SCHD seeks to match the performance of the Dow Jones U.S. Dividend 100 Index before fees and expenses. The Dow Jones U.S. Dividend 100 Index is designed to measure the performance of high dividend yielding stocks issued by U.S. companies that have a record of consistently paying dividends, selected for fundamental strength relative to their peers, based on financial ratios.

The ETF return is roughly 13.91% so far this year and was up about 23.60% in the last one year (as of 10/01/2024). In the past 52-week period, it has traded between $66.90 and $85.06.

The ETF has a beta of 0.85 and standard deviation of 14.57% for the trailing three-year period, making it a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.

Alternatives

Schwab U.S. Dividend Equity ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, SCHD is a sufficient option for those seeking exposure to the Style Box - Large Cap Value area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $60.31 billion in assets, Vanguard Value ETF has $127.67 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Schwab U.S. Dividend Equity ETF (SCHD): ETF Research Reports

Lockheed Martin Corporation (LMT) : Free Stock Analysis Report

CocaCola Company (The) (KO) : Free Stock Analysis Report

AbbVie Inc. (ABBV) : Free Stock Analysis Report

Vanguard Value ETF (VTV): ETF Research Reports

iShares Russell 1000 Value ETF (IWD): ETF Research Reports

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