This Top Dividend ETF Loves These Leading Oil Stocks. Should You Buy Them, Too?

2 days ago 2

Unlock banal picks and a broker-level newsfeed that powers Wall Street.

Matt DiLallo, The Motley Fool

Sun, Mar 30, 2025, 9:19 AM 4 min read

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) is simply a fashionable exchange-traded money (ETF) among dividend investors. It holds 100 of the highest-quality dividend stocks and tracks an scale (Dow Jones U.S. Dividend 100 Index) that screens companies based connected the prime of their dividends.

Because of that, this ETF tin beryllium a large instrumentality for investors to use to find top-notch dividend stocks to adhd to their income portfolio. Currently, the Schwab U.S. Dividend Equity ETF's apical 2 holdings are lipid giants ConocoPhillips (NYSE: COP) and Chevron (NYSE: CVX). Here's a person look astatine this money and wherefore it loves those 2 starring oil stocks.

The Schwab U.S. Dividend ETF is 1 of the apical dividend ETFs. With implicit $70 cardinal successful assets nether absorption (AUM), it's the second-largest ETF focused specifically connected dividend stocks.

A large crushed truthful galore investors person poured their wealth into this ETF is its absorption connected dividend quality. The ETF tracks the Dow Jones U.S. Dividend 100 Index, which aims to measurement the show of high-yielding dividend stocks with records of consistently paying dividends. It besides selects companies based connected the spot of their fiscal profiles compared to their peers.

The money reconstitutes its holdings annually, ensuring it holds the apical 100 dividend stocks by the prime of their payouts. It precocious jettisoned 23 stocks and replaced them with 23 companies with even higher-quality payouts. In addition, the money adjusted its allocations. As a result, the ETF's apical 2 holdings are presently ConocoPhillips (4.6% of its assets) and Chevron (4.4%).

Investors seeking to make dividend income could simply bargain this ETF. They'd summation vulnerability to 100 apical dividend stocks with a precise attractive combined dividend output of 3.7% based connected the fund's latest dividend payment. That's good supra the S&P 500's dividend output (1.3%). Alternatively, investors could cherry-pick holdings retired of the money to adhd to their existing portfolio of dividend payers.

Chevron and ConocoPhillips surely basal retired for their quality to wage dividends.

Chevron is an elite dividend stock. The lipid elephantine has accrued its dividend outgo for 38 consecutive years. Over the past 5 years, the institution has grown its dividend faster than the S&P 500 and astir treble the complaint of its closest peer. Meanwhile, the institution offers an charismatic output of 4.1%.

Chevron should person nary occupation continuing to summation its dividend successful the future. The lipid company expects to adhd $10 cardinal to its yearly escaped currency travel by 2026, fueled by high-margin accumulation maturation and cost-cutting initiatives. For perspective, past year, Chevron produced $15 cardinal successful escaped currency travel and paid $11.8 cardinal successful dividends. Its surging escaped currency flow, which doesn't origin successful closing its highly accretive acquisition of Hess, should springiness it plentifulness of substance to proceed increasing its high-yielding dividend astatine an above-average rate.