The Schwab U.S. Dividend Equity ETF (SCHD) has adjusted its energy sector exposure following a significant rise in crude oil prices, which have surged 70% this year, pushing Brent crude above $100 a barrel. Despite benefiting from a high allocation to energy stocks—23.5% at the start of the year—the fund has reduced this weighting to 16.3% after its annual reconstitution, selling off three energy holdings and adding 25 new stocks.

This strategic shift comes as energy stocks have provided strong returns, helping SCHD outperform the S&P 500 by over 15 percentage points. However, the decision to cut energy exposure reflects concerns about slower dividend growth from some holdings, prompting the fund to focus on stocks with better yield prospects. Notably, SCHD has added Devon Energy, which plans to significantly increase its dividend after a merger, while maintaining substantial positions in dividend stalwarts Chevron and ConocoPhillips.

Investors should note that while SCHD is reducing its energy allocation, it still retains meaningful exposure to the sector, particularly through high-yielding stocks with strong growth potential, positioning the fund for continued robust returns.

Source: fool.com