Why SCHD’s Income Is Unshakable This Year: 6 Dividend Aristocrats Doing the Heavy Lifting
Six Dividend Aristocrats shoulder a big chunk of SCHD's 3.8% yield, but two of them are paying dividends that their earnings barely cover. Here is how close to the edge each one actually sits.
This post may contain links from our sponsors and affiliates, and Flywheel Publishing may receive compensation for actions taken through them.
Every stock in the Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD) passed a quality screen to qualify. The question for income investors is whether the companies paying the dividends can keep raising them. The fund tracks the Dow Jones U.S. Dividend 100 Index, which screens for cash flow to debt, return on equity, yield, and five years of dividend growth. It yields about 3.8% and charges a 0.06% expense ratio. Six veteran dividend growers in the portfolio show why that income holds up. Two of them are running much closer to the edge than the other four.
Where SCHD’s 3.8% Yield Comes From
SCHD takes in ordinary cash dividends from its 100 stocks and pays them out quarterly. Each dollar of yield comes from a dividend a real company declares.
Holdings data come from the fund’s latest portfolio filing, dated May 31, 2026. At that point, SCHD held $94.9 billion in net assets, with the largest position at about 6.7% of the fund and the top 10 making up roughly 43.6%.
Together, the six names below account for about 14.1% of the fund. The index reconstitutes every March, which means a declining dividend payer can be dropped before it weighs on the fund’s payout for long.
Six Payout Records Under the Microscope
Chevron Turns Hess Into Dividend Fuel
Chevron (NYSE:CVX | CVX Price Prediction) is the largest of the six at 3.8% of assets and yields 3.2%. Its quarterly dividend rose to $1.78 this year. The 2025 raise had already brought its growth run to 38 years.
Second-quarter free cash flow reached $18.10 billion as the Hess acquisition drove production to record levels, and Chevron paid down $8.41 billion of debt.
The $7.12 annualized dividend works out to about 69% of trailing EPS of $10.39. Crude prices are the main risk. A long slide in oil would quickly.
ADP Keeps Raising on Payroll Cash
Automatic Data Processing (NASDAQ:ADP) makes up 2.2% of the fund and yields 2.6%. In November 2025, it raised the quarterly dividend to $1.70, its 51st consecutive annual increase.
The $6.80 annualized payout uses about 61% of fiscal 2026 EPS of $11.12. Management guides for fiscal 2027 adjusted EPS growth of 9% to 11%.
Abbott’s Earnings Dip Comes From Deal Accounting
Abbott Laboratories (NYSE:ABT) makes up 3.0% of the fund and yields 2.5%. According to its filing, the $0.63 quarterly payout marks its 54th consecutive year of dividend increases and its 410th consecutive quarterly dividend.
Second-quarter GAAP EPS dropped to $0.53 because of charges linked to the Exact Sciences acquisition. Management raised full-year adjusted EPS guidance to $5.45 to $5.60, which puts the payout at about 45% to 46% of that range.
Kimberly-Clark Is the Closest Call
Kimberly-Clark (NASDAQ:KMB) is the smallest of the six at 0.8%, but it yields 5.3%. This year, it raised the quarterly dividend to $1.28, extending its run to 54 consecutive years.
Coverage is thinnest here. Trailing GAAP EPS of $5.07 barely covers the $5.08 per share paid out over the past year. Second-quarter adjusted EPS of $2.12 covered the quarterly dividend at a payout of about 60%.
Management expects 2026 adjusted EPS to decline slightly because a disinformation campaign in China is hurting diaper sales and a fire at a Los Angeles distribution center. The Kenvue acquisition, expected to close by the end of 2026, adds integration risk. Adjusted coverage keeps the dividend safe for now, but a second straight year of falling earnings would pressure it.
Altria Pays an Ultra-High Yield From a Shrinking Base
The group’s only ultra-high-yield name, Altria (NYSE:MO), makes up 2.9% of the fund at 6.2%. Its August raise to $1.11 per share adds to a record 60 increases in 56 years.
The $4.44 forward payout equals roughly 78% to 79% of 2026 adjusted EPS guidance of $5.61 to $5.72. That ratio is normal for a tobacco business requiring little reinvestment. The real threat is volume: domestic cigarette shipments fell 3.2% last quarter. Price increases have offset falling volume for years, and the raised guidance suggests they still do.
Fastenal Brings the Youngest Streak and the Fastest Growth
Fastenal (NASDAQ:FAST) makes up 1.3% of the fund and has the group’s lowest yield at 1.8%. Its 27 consecutive years of dividend growth surpass the 25-year threshold required to qualify as a Dividend Aristocrat.
The $0.26 quarterly dividend comes to about 89% of trailing EPS. Second-quarter dividends of $275.4 million slightly exceeded operating cash flow of $265.7 million because working capital absorbed cash.
Revenue rose 14.7% in the second quarter, driven by contract customers, so earnings are catching up to the payout.
A 22% Year and a Payout Built to Last
On a dividend-adjusted basis, SCHD is up about 22% this year and 24% over the past 12 months. Over five years, it’s up 54%, and over ten years, 227%.
SCHD’s income is safe. Chevron, ADP, and Abbott cover their dividends with room to spare. Fastenal’s revenue growth is closing the gap on its tight payout. Altria’s high payout fits a business requiring little reinvestment. Kimberly-Clark is the biggest risk, but at under 1% of the fund, the index can drop it at the March reconstitution if earnings keep falling.
Investors who need 6% or more in income across a whole portfolio won’t get it from a fund yielding 3.8%. Growth-focused investors may find that the fund’s tilt toward mature cash generators trails during tech-led rallies. The next milestones are Kimberly-Clark’s first guidance after the Kenvue deal closes, Altria’s shipment trends, and Chevron’s dividend declaration early next year.
Contact [email protected] for any questions or corrections.
Lee Jackson has covered Wall Street analysts' equity and debt research and equity strategy daily for 24/7 Wall St. since 2012. His broad, diverse career, including a stint as creative services director at an NBC affiliate in Austin, Texas, gives him unique insight into the financial industry.
Lee Jackson's journey in the financial industry spans more than 30 years, including nearly two decades as an institutional equity salesperson at Bear Stearns, Lehman Brothers, and Morgan Stanley. His career spanned pivotal sell-side Wall Street events, from the dot-com rise and bubble to the Long-Term Capital Management debacle, 9/11, and the Great Recession of 2008. This reflects his resilience and adaptability amid market volatility.
Lee Jackson’s practical financial industry experience, gained through a career at some of the biggest banks and brokerage firms, is complemented by a lifetime of writing across various platforms. This unique combination allows him to shed light on the intricacies of Wall Street in a way only someone with deep insider experience and knowledge can. Moreover, his extensive network across Wall Street continues to provide direct access for him and 24/7 Wall St., a privilege few firms enjoy.
Since 2012, Jackson’s work for 24/7 Wall St. has been featured in Barron’s, Yahoo Finance, MarketWatch, Business Insider, TradingView, Real Money, The Street, Seeking Alpha, Benzinga, and other media outlets. He attended the prestigious Cranbrook Schools in Bloomfield Hills, Michigan, and has a degree in broadcasting from the Specs Howard School of Media Arts.
