SCHD’s New Strategy: Why Energy Stocks Dominate the Dividend ETF in 2025
The Schwab U.S. Dividend Equity ETF (SCHD), one of the most widely held dividend-focused ETFs, has undergone a major shift in its portfolio composition in 2025. Energy has now become the top sector in the ETF, accounting for over 21% of the fund’s holdings—surpassing consumer staples, industrials, and healthcare. This is a significant leap from previous years when energy was more of a supporting allocation. Investors are now watching closely to see how this tilt toward energy will impact long-term dividend stability and performance.
What Makes Energy Stocks Attractive to SCHD?
In 2025, energy stocks are once again in favor, driven by strong oil prices, geopolitical tensions in commodity-producing regions, and higher global demand for fossil fuels. With inflation stubbornly high and the Federal Reserve maintaining elevated interest rates, value-oriented sectors like energy are offering strong dividend yields and cash flow stability. SCHD’s screening criteria require companies to have at least 10 years of consistent dividend growth, healthy return on equity, and solid earnings momentum. These filters have pulled in a select group of energy giants that offer both high dividends and financial discipline.
ConocoPhillips: The Largest Energy Holding in SCHD
ConocoPhillips (Ticker: COP), listed on the New York Stock Exchange (NYSE), is the top energy holding in SCHD, making up approximately 4.07% of the ETF’s weight. Operating within the Energy sector, ConocoPhillips is a leading upstream oil and natural gas producer. The company has demonstrated exceptional free cash flow generation, supported by low-cost shale production and disciplined capital expenditures. It returned over $11 billion to shareholders in the last year through dividends and share buybacks, making it a prime candidate for dividend-focused investors.
Chevron: Balanced Exposure and Reliable Cash Flows
Chevron Corporation (Ticker: CVX), also traded on the NYSE, holds about 3.85% of SCHD’s portfolio. As a fully integrated oil major operating in the Energy sector, Chevron offers balanced exposure to both upstream exploration and downstream refining. This diversification helps smooth revenue during volatile commodity cycles. Chevron has increased its dividend for more than 35 consecutive years and maintains a payout ratio below 60%, leaving room for continued shareholder returns even during oil price downturns. Its strong balance sheet and multibillion-dollar cash reserves make it a long-term anchor within SCHD.
EOG Resources: A High-Performance Shale Leader
EOG Resources (Ticker: EOG), listed on the NYSE, is another significant holding, accounting for roughly 2.6% of SCHD’s energy weight. Like ConocoPhillips, EOG is part of the Energy sector and focuses on domestic shale oil and gas assets. The company is known for its operational efficiency and ability to generate robust returns on capital, even at moderate oil prices. EOG has aggressively grown its dividend over the last five years, while maintaining a conservative balance sheet. With strong fundamentals and production growth, it fits SCHD’s criteria for sustainable dividend excellence.
What It Means for SCHD Investors in 2025
The decision to overweight energy is strategic. While it introduces more volatility, it also offers the potential for higher returns and enhanced yield. Energy stocks currently provide some of the most attractive dividends in the market, with yields exceeding 4% in many cases. In comparison, the overall SCHD yield stands near 3.8%—significantly higher than other large dividend ETFs like Vanguard Dividend Appreciation (VIG) or iShares Core Dividend Growth (DGRO), which yield under 2.5%.
For long-term investors who can tolerate commodity-linked fluctuations, SCHD's energy exposure could deliver not just higher income but also capital appreciation as energy demand rises. However, investors should be aware of sector-specific risks including regulatory headwinds, ESG pressures, and the cyclical nature of oil prices.
Final Thoughts: A Bold Yet Calculated Bet on Energy
The Schwab U.S. Dividend Equity ETF’s increased concentration in energy stocks signals a shift in its approach to income and growth in 2025. With ConocoPhillips, Chevron, and EOG Resources leading the charge, SCHD is doubling down on proven, dividend-growing companies that can withstand economic cycles. All three companies operate in the Energy sector and trade on the NYSE, giving SCHD a stable, income-rich core. While the risks are not negligible, especially in a volatile oil market, the fundamentals behind these selections are sound and consistent with SCHD’s long-term quality filters.
This analysis was built using data extracted and restructured from the following sources: Charles Schwab Asset Management, MarketWatch, Yahoo Finance, The Motley Fool, Barron’s, Barchart, and Reuters.