SCHD’s Rules Sold Broadcom in March 2024. The Stock Is Up About 183% Since, and SCHD Holders Missed the Run

If you own the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) for income, you probably trust its rules more than any stock picker. In March 2024, those rules dropped Broadcom (NASDAQ:AVGO | AVGO Price Prediction) from the fund’s index. From its March 15, 2024 close to its September 28, 2026 close, Broadcom’s share price rose about 183%. SCHD holders owned none of that run.

How a Rising Share Price Gets a Stock Sold

SCHD tracks the Dow Jones U.S. Dividend 100 Index, which reconstitutes once a year in March. The index ranks candidates partly on dividend yield, meaning the annual dividend divided by the share price. That fraction hides a catch most holders never think through. When a stock’s price rises faster than its dividend, its yield shrinks. Shrink it far enough, and the stock falls below the screen. The rule then sells it.

The business may be booming. The dividend may be rising. The stock still gets sold because it went up. A yield screen can treat a rising share price as a disqualification, so it drops winners at the moment they are winning.

That is the hidden cost here, and no fee table shows it. SCHD’s publicly cited expense ratio of 0.06% is tiny. This rule costs more.

What Broadcom Did After the Exit

Broadcom closed at $1,235.50 on March 15, 2024. After its 10-for-1 split, that close adjusts to $123.55. On September 28, 2026, it closed at $349.57.

The approximate 183% figure runs close to close between those two dates, on a price-only basis before dividends.

On a total return basis, the dividend-adjusted alternative over the identical window shows a gain of 190.87%.

SCHD Holders Still Earned Solid Gains

The capital released by the removal went to work in other index constituents, and the fund delivered. Over the same window, SCHD’s adjusted price rose 39.21%. It is up 22.40% year-to-date and 24.64% over the past year. The fund held $94.9 billion in net assets as of May 31, 2026, when Qualcomm (NASDAQ:QCOM) at 6.74% and Texas Instruments (NASDAQ:TXN) at 5.90% ranked as its two largest positions. Holders kept chip exposure through other names.

Timing matters too. Broadcom is up just 3.35% year-to-date and 7.12% over the past year. The enormous gain sits in the stretch right after the removal.

Every Yield Screen Repeats This Trade

Broadcom is one example of a design feature. Any yield threshold rule will also likely push out fast-rising dividend payers, a different set of names every year. That is the recurring price of the strategy.

The same rule also provides real value. Combined with quality tests, a yield screen guides the fund away from yield traps, stocks whose high payouts signal a dividend at risk. Discipline cuts both ways. It blocks panic, and it blocks patience with a winner.

Funds That Keep Rising Dividend Stocks Longer

Investors who want dividend exposure with a softer exit rule have options. The Vanguard Dividend Appreciation ETF (NYSEARCA:VIG) screens for long records of dividend increases and excludes the highest yielders, so a rallying stock can stay eligible. That comes with lower current income and greater exposure to growth names. Additionally, a broad S&P 500 index fund keeps every winner but gives up the income focus entirely.

Who SCHD Suits and What to Check Before Buying

SCHD suits a retiree who wants rising quarterly income from established companies and values a rule that blocks emotional decisions. Its latest distribution was $0.2665 per share, up from $0.2525. That investor gives up the long tail of the market’s biggest compounders, which the yield screen will sell once their prices outrun their dividends. Before buying any rules-based fund, open its fact sheet and index methodology and find the exit rule. Then ask one question: what forces this index to sell a stock, and would I agree with that sale when it is my biggest winner?

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