"Even as Stocks Tumble, This ETF Stands Strong"... The Secret Behind the Steadily Rising ETF [Weekend Money]

U.S. Dividend Stocks Offer Strong Defense in Volatile Markets
Healthcare and Energy Exposure Drive Upward Momentum

As the clashes between the United States and Iran that began early this year continue, the stock market, including macro sectors, has been fluctuating on a daily basis. In these circumstances, there is an ETF that has maintained an upward trajectory: the “Schwab US Dividend Equity ETF (Dow Jones High Dividend·SCHD).” According to analysts in the securities industry, this product can be used not only as a hedge against volatility, but also to capture upward momentum.

As the clashes between the United States and Iran that began early this year continue, the stock market, including macro sectors, has been fluctuating daily. In this situation, there is an ETF that has been trending upward. Getty Images

Park Wooyeol, a researcher at Shinhan Securities, said, "Amid the recent market correction, the only index product showing an upward trend is SCHD, which is thanks to the sector bias of high dividend stocks in the United States. We propose SCHD and the State Street Energy Select Sector SPDR ETF (XLE) in energy as ETFs that can help navigate volatility and respond to an external environment where geopolitical risks are increasing."

Park explained, "Both newly record-setting healthcare stocks and the energy sector—which actually benefits from oil price volatility driven by geopolitical risks—have a significant weighting in these ETFs. There is also a high allocation to consumer staples, which are less affected by market corrections, and the portfolios are constructed with stocks that demonstrate strength in volatile markets, considering factors such as cash flow, ROE, and dividend sustainability."

He also emphasized that, unlike Korean dividend stock ETFs, US dividend stock ETFs are not skewed toward companies in the latter stages of their life cycle. Typically, companies experiencing rapid growth in the early stages of their business lifecycle focus on reinvesting for expansion rather than paying dividends, and therefore are not usually classified as dividend stocks. In contrast, in industries where companies are in the late stages of their life cycle and growth potential is limited, the capacity for shareholder returns and dividends increases. As a result, such high-dividend groups develop a pronounced sector bias.

Park stated, "Because of differences in the structure of listing markets by country, the sector allocation of Korean and US dividend stock ETFs varies greatly." In Korea, banks and telecommunications comprise the vast majority of allocations, and these companies tend to be in the latter stages of their corporate life cycle. In contrast, US dividend stock ETFs tend to have larger allocations to healthcare and energy sectors. He added, "Both of these sectors have recently seen growing momentum, so at present, US dividend ETFs can be understood not only as defensive plays but also as a means to invest in sectors with strong upward momentum."

This content was produced with the assistance of AI translation services.