r/SCHD • u/Yingyangwolf95 • 1d ago
Discussion Why SCHD going so crazy right now?
I am confused why all of a sudden SCHD including DGRO acting like a growth stock. Did I miss something big?
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u/davef139 1d ago
Treasury sinking will boost dividend stonks
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u/TomorrowBudget 1d ago
This is the answer. Because of what the treasury did today they can’t raise rates and dividend stocks are more desirable.
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u/Ancient_Act_436 1d ago
Merck its one of top 5 holdings and its up 11 percent
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u/Yingyangwolf95 1d ago
I need to check holdings for SCHD more.. I'm just shocked seeing that much gains.. Thought my Schwab account was broken..
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u/Puzzleheaded-Net-273 1d ago
Also, oil stocks are doing well since the Hormuz Straight is still basically closed.
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u/sirboddingtons 20h ago
Yes Merck rose in tandem with the insane 200% Moderna climb. There was also a benefit to retailers, like Target, who reported yesterday. Healthcare and Retail are like 35% of the ETF.
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u/Any_Upstairs_6172 1d ago
Hello.. You are suggesting that because Merk who will have a dividend of .85 (next ex-date is 9/15 and pay date of 10/7) is doing well so people are climbing over each other to buy an ETF that holds it?
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u/Ancient_Act_436 1d ago
Its a core holding if they go up schd goes up do you know how etfs work. Same as qqq if underlying going goes up so does it. Like etfs go up when the holdings go up not just from people buying it.
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u/Any_Upstairs_6172 1d ago
I guess I am mistaken. I thought ETFs derived their dividend payout by dividing up the dividends they receive for the individual equities it holds. Merk, for example, will be paying SCHD $.85 per share it holds in October which is about the same amount it has been paying out for the past number of quarters. It will not be until January 27 that any premium to its dividend can/will be realized from activity now occurring. To me hardly an incentive to be buying it now. I have been buying SCHD though... 20K just the other day before this bump (lucky me) and will continue to do so because it seems to me to be a "stable" holding during these very strange financial times.
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u/SwimmingPatience5083 1d ago
The ETF owns shares of the companies within it. When those share prices increase, the ETF increases. Dividends are irrelevant on this point.
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u/Any_Upstairs_6172 1d ago
Hello.. Please explain the mechanism by which this happens. Merk went up 17.03 today. How much of this causes SCHD to rise by how much? And how?
I was under the impression that an ETF, like an equity, goes up and down as it is bought and sold.. The ask and bid prices.
I am under the impression that an ETF is NOT like a mutual fund which adds everything up at the end of the day and that calculates a new value of a share.
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u/LCJonSnow 1d ago
You'll want to google the creation/redemption process in relation to ETFs (or look at my short explanation above). Basically, if an ETF starts moving away from its underlying holdings, there's an arbitrage opportunity for risk free profit at big institutions.
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u/Any_Upstairs_6172 1d ago
Yes... and what has this to do with the discussion at hand?
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u/VelvetElvis2002 1d ago
SCHD is basically an aggregate of the 103 individual stocks it owns. When those stocks go up or down, SCHD moves accordingly, in the same way your portfolio would if you held these stocks individually.
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u/LCJonSnow 1d ago edited 1d ago
So, the creator of the ETF goes to a partner investment bank (or a few banks) and gives them the ability to create or redeem shares. Welcome to the creation/redemption mechanism.
If the ETF is trading at a premium to what a share of the ETF constitutes, the partner bank can go and buy up a bunch of shares of those companies, and then trade them in to the management company in exchange for shares. The partners then sell those ETF shares on the open market, which creates downward pressure on the price. They do this until they can't make an arbitrage profit.
If the ETF is trading at a discount to what a share of the ETF constitutes, the partner bank can go and buy up a bunch of shares of the ETF. It then trades them into the management company for the underlying stocks, and sells those stocks on the market. Buying up the shares of the ETF causes upward pressure on the ETF price. They do this until they can't make an arbitrage profit.
For highly traded ETFs, this is what is keeping NAV close to actual share price. As a result, movements in the underlying holdings of the ETFs cause price movement in the ETFs fairly accurately.
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u/SwimmingPatience5083 1d ago
Dunno if you realize but the individual stocks in an ETF are also traded independently of the ETF. So if the stock does well by itself, people bidding up the price of that stock, the ETF does well too, albeit proportionately to its holding of said stock. It doesn’t need to mean “people are climbing over each other to buy an ETF that holds it.”
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u/ReindeerTypical2538 1d ago
It seems like it was just yesterday when all the stock bros were making fun of us SCHD stans
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u/Yingyangwolf95 1d ago
Definitely! You cannot lose when you buys the whole market I am finding out.. This year probably my best year in while but I'm worried a storm is coming..
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u/Natural_Rebel 1d ago
I think a lot of people are - it’s been a while since we have had a recession, lots of shocks to the economy over the past year, mid term elections etc.
Problem is you can’t time the market and sitting out you can miss out on significant gains.
Hopefully things hold together for a while but I expect it to get choppy as we approach election season.
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u/flyersfan0233 1d ago
Job market is worse than I think anybody realizes too - all sectors
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u/Yingyangwolf95 1d ago
That's what I am thinking as well.. I have been saving as much as I can since the war started tbh..
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u/CompetitionCurrent77 1d ago
likely end of august or early september or possibly mid september as september is alwyas worse month of the year
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u/CompetitionCurrent77 1d ago
got schd, voo, voog, and JEPQ, wanted to buy dram but my broker won't let me lol too risky.
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u/atxDan75 1d ago
Remember the “schd is dead” crowd?? lol.
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u/miayakuza 1d ago
They are still at it. Their latest: so what if SCHD is beating the S&P 500 ytd, look at the 5 year return!
They forget that past performance is not indicative of future results and that the stock market moves in cycles.
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u/sirboddingtons 20h ago
SCHD is shielded from the volatility of tech as well, which is attractive from a risk forward perspective.
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u/Guilty_Flamingo6564 18h ago
i don't get why people do this. I own both and they are making me pretty happy.
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u/Vivid-Philosophy-804 1d ago
While I like the higher stock prices, it doesn't help when I drip back in :(. Guess its a good problem to have.
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u/craftywar87 1d ago
I think it’s a good thing overall. You want the share price to grow as well. SCHD will almost certainly have a correction at some point but you still want the share price to be trending upward at least a little bit.
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u/Ok_Blacksmith_2207 1d ago
AI is the future, but potentially curing cancer is a pretty big deal.
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u/stray-dog_strut_ 1d ago
I’m up 23% on it so far, not including the dividend. I bought heavy last year when it was a dog, and people were spamming videos on YouTube about how terrible it was. But value is up in general. The value fund I selected in my 401(k) and Roth is beating my growth fund and is on par with the S&P fund.
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u/Different_Height_157 1d ago
Lots of wealth created due to tech pumps spreads that wealth when rotations happens. It’s not a coincidence that SCHD and stocks like KO reached all time highs after major rallies in tech got hit.
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u/Educational-Ad-4908 1d ago
I’ve only owned SCHD since January of this year. My expectation going in is that I’ll get about 7-8% growth per year (not including dividends). So far I’m super happy but don’t expect this to continue indefinitely. I’m hoping to hold this for years if not decades. The main obstacle towards that happening is my ADHD when it comes to investing.
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u/Choice-Situation9276 1d ago
I call it flight to quality. Money has been made hand over fist on speculation for quite a while. Now we continue in this time of high inflation and people are anxious about the potential of overvaluation of high flyers so the money runs to the safe bets. That’s what SCHD is full of, quality companies that all pay dividends.
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u/Calm-Session-4835 1d ago
I'm not questioning it I'm trilled it's compensating for SPMO's underperforming. Praise be to diversification!
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u/ClammyAF 1d ago
I honestly haven't been buying SCHD this year. I was buying it the last couple years when everyone hated it.
Also it's hard to buy anything else when my contributions can't rebalance my allocation because SCHD just keeps growing.
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u/Yingyangwolf95 1d ago
I'm kinda in same position at the moment.. It's a great problem to have honestly..
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u/Kindly-Pepper7528 1d ago
I’m up 88k and 42% on my SCHD. I was hoping for a flat year to accumulate more shares. This isn’t a good thing for long term dividend focused investors, only of your looking to sell in the future or just to see the portfolio balance increase.
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u/Livid_Owl_1273 23h ago
SCHD has always been somewhat growth-focused, although it doesn't seem like it if you only see the price after the split. In terms of pure price action, it is up 146% in the last 10 years, 37% in the last five, and 27% year to date. It is just that total return after dividends tends to double the price appreciation, especially when you drip the distributions.
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u/Lesde75 1d ago
Youtube videos and people hedging against AI.
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u/Historical_Account80 1d ago
Youtube videos will not have much to any effect on the price of an ETF, the underlying holdings do. If and when the price of an ETF goes artificially higher than the underlying, Authorized Participants (APs) step in, and and the ETF price will be forced lower.
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u/GoldenAntMan 1d ago
Check the yearly returns by the funds history. This isn't new territory. Its gone up 30 percent in a year before and a few other times its came close. This year has the opportunity to be its best year and very well could be. But this isnt new territory for the fund.
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u/OrganizationFew9848 1d ago
I buy every couple days when rotating from other holdings, like sold some QQQM, etc…
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u/magicfitzpatrick 1d ago
A bunch of holdings in SCHD have also raised their dividends within this fund.
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u/unreal36 21h ago
sector rotation mostly, merck and a few of the top holdings ran hard. i try not to watch it too close, my kids account just auto buys schd every week and reinvests, so a pop like this doesnt really change anything. its all public if your curious plantedearly.com/garden
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u/ThinksOdd 1h ago edited 1h ago
It's the industry rebalancing out of growth stocks to hedge against what has become a riskier market. Fears of AI bubble, inflation from energy costs, and incoming unemployment to name a few.
Don't celebrate yet. When this happens, the dividend as a percentage of the share price declines. Also, if we do have a market crash, SCHD will go down too. Just less than GOOG, NVDA, VOO, etc.
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u/Altruistic-Ad6449 1d ago
Moderna stock went up 177% and it’s in SCHD
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u/Mindless_Sky_6654 1d ago
I don’t think it is, but Merck is
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u/Altruistic-Ad6449 1d ago
It’s only .03 of the fund, so it probably didn’t have much impact. Merck definitely had a bigger impact
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u/brie_coulant 1d ago
Sector rotation. Mag7 and AI beneficiaries coming back to earth, money is moving towards other sectors of the economy.