The Schwab U.S. Dividend Equity ETF (SCHD) has gained significant traction, boasting over $85 billion in net assets and a 3.3% yield, with a year-to-date increase of 10.8%—a stark contrast to the S&P 500’s 5% decline. Its strong performance is largely attributed to its substantial exposure to the energy sector, which constitutes 23.9% of the ETF and includes major players like ConocoPhillips and Chevron. However, this concentration raises concerns for risk-averse investors who typically favor diversification.

While the ETF benefits from rising oil prices, the reliance on energy stocks introduces volatility, as these companies are sensitive to fluctuations in commodity prices. Notably, aside from Chevron, many of the energy holdings lack consistent dividend growth histories, which could pose risks during downturns in oil prices.

For those seeking high-yield options with less exposure to energy volatility, alternatives like the iShares Select Dividend ETF (DVY) may be worth considering, as it offers a more diversified sector allocation with a lower energy weighting.

Source: fool.com