Why SCHD’s Strong 2026 Rally Is Bad News for Income Investors Adding Monthly
SCHD has had a remarkable run in 2026, but for investors buying shares every month with retirement income in mind, that strength quietly works against them in a way most overlook until the math catches up.
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A $1,000 purchase of Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) on the last trading day of 2025 bought $38.19 of annual dividend income. The same $1,000 today buys $32.28. SCHD has returned 22% this year with dividends reinvested, and that strong run is why each new dollar going into SCHD buys less income than it did in January.
If you already own the fund, this year’s price gain has added to the value of your shares. Many people, however, buy SCHD with every paycheck to build retirement income, and for them the price gain works against the goal.
The fund still holds mature, cash-rich dividend payers, and the checks still come every quarter. What changed is the price of those dividends. That cost falls only on new money, and how much it costs depends on how fast the payout grows from here.
Price Ran 19% While the Payout Barely Moved
SCHD closed 2025 at $27. It finished October 7 at about $33, a 19% price gain.
The trailing twelve-month dividend went from $1.0476 to $1.0541 over the same period. Growth was just 0.6%.
A yield is the payout divided by the price. With the price up sharply and the payout flat, the trailing yield fell from 3.8% to 3.2%, even though nothing went wrong inside the fund.
The quarterly payments explain why the trailing figure stayed flat. December paid $0.2782, while March paid $0.2569 and June paid $0.2525. Even September’s $0.2665 came in below December’s payment.
Your $1,000 Now Buys 16% Fewer Shares
On the last day of 2025, $1,000 bought 36.46 shares. Today, it buys 30.63 shares, which is 16% fewer shares and 16% less income per dollar.
Scale that to a year of $1,000 monthly purchases. Twelve buys at the year-end 2025 price would have added $458 of annual income, while the same program at today’s price adds $387.
Your total return can still look fine because earlier shares gained value. If you are building future income, though, the income each dollar buys is what matters, and it has dropped. (Building a dividend ladder you never have to sell is the whole point of our free guide, here.)
Catching Up Takes 2.5 Years or 8.7
Yield on cost is the income you bought divided by what you paid, and it grows only when the fund raises its payout. A buyer today starts at 3.2% and needs time to reach the 3.8% that year-end buyers locked in.
SCHD’s annual dividend grew from $0.8538 in 2022 to $1.0476 in 2025, a 7% yearly rate. At that pace, today’s buyer catches up in about 2.5 years.
The one-year growth rate is only 2%, and at that pace catching up takes about 8.7 years. Nobody can know which rate will hold, so the entry price matters.
The entry math has improved. SCHD set a closing high of $35 on August 24, fell 6% in September, and now stands 7% below that peak.
If you wait, you assume the decline continues. Entry yield recovers only if the price keeps falling or distributions step up, and the next quarterly payment will show whether the trailing figure resets higher.
Time Horizon Decides Whether SCHD’s Lower Yield Matters
Accumulators with a decade-long horizon have the most room to handle the lower entry yield. Over that period, the entry yield gap matters less than owning a fund whose 19% price gain this year beat the 14% gain in the SPDR S&P 500 ETF Trust (NYSEARCA:SPY).
If you need income within a few years, other options pay more today. The 10-year Treasury yields 5.3% against SCHD’s 3.2%, and that rate is fixed for the life of the bond.
What you give up is growth. A bond coupon never grows, while SCHD’s payout grew 7% yearly from 2022 to 2025.
If you have finished building your position, entry yield no longer matters. The yield math above applies only to new purchases.
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Omor Ibne Ehsan is a writer at 24/7 Wall St. He is a self-taught investor with a focus on growth, cyclical, and dividend equities that have strong fundamentals, value, and long-term potential. He also has an interest in high-risk, high-reward investments such as penny stocks.
