The Schwab U.S. Dividend Equity ETF Surges 15% in Early 2026: The Oil Sector’s Powerful Role
By Matt DiLallo – February 21, 2026
The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) has started 2026 with remarkable momentum, posting a robust 15% gain so far this year. This performance far outpaces the S&P 500’s modest less than 1% rise in 2026, signaling a compelling rally for dividend-focused investors. The driving force behind this impressive surge? A substantial exposure to the energy sector, powered by climbing oil prices.
A Heavyweight in Dividend ETFs
SCHD is one of the most popular exchange-traded funds dedicated to dividend stocks. It offers investors a high current income yield, approximately 3.5% over the last 12 months, combined with a long track record of solid returns. Despite producing a tepid 0.4% return throughout 2025, the ETF’s performance trajectory has sharply improved in 2026. The fund follows the Dow Jones U.S. Dividend 100 Index, which selects companies based on multiple dividend-related criteria, including yield and consistent five-year dividend growth. The index consists of 100 high-quality dividend-paying companies providing broad market exposure, but it features a pronounced tilt toward energy stocks—nearly 20% of its portfolio at the end of last year.
Oil’s Comeback: The Secret Fuel
Energy stocks had been a drag on SCHD’s returns in 2025 due to declining crude oil prices. However, in 2026, the landscape has shifted dramatically. Brent crude, the global benchmark for oil prices, has risen about 15% to over $70 per barrel. Heightened geopolitical tensions—including the U.S. Navy detaining Venezuela’s former president on narcoterrorism charges and escalating concerns about conflict involving Iran—have threatened supply stability and pushed prices higher.
This spike in oil prices has ignited the energy sector’s stocks, significantly benefiting SCHD’s performance.
Top Oil Dividend Stocks Powering SCHD
Among SCHD’s core holdings, two oil giants stand out for their influence on the fund’s recent gains:
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Chevron (CVX) is SCHD’s fourth-largest holding, representing 4.21% of the fund’s assets. Chevron has been a reliable dividend payer, recently raising its dividend by 4%, extending its streak to 39 consecutive years of dividend growth—the second-longest in the oil industry. It has grown dividends at a compound annual rate of 6% over the past five years, exceeding the S&P 500’s 5%. Currently, Chevron yields about 3.9%, well above the S&P 500’s 1.2%.
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ConocoPhillips (COP) holds the sixth-largest position in the fund at 4.19%. The company offers a 2.9% dividend yield and increased its payout by 8% late last year. ConocoPhillips aims to grow dividends among the top 25% of S&P 500 companies.
In addition to these leaders, SCHD allocates meaningful portions to other energy stocks such as Schlumberger (SLB), EOG Resources, and Valero Energy. All five energy stocks have surged in 2026, contributing substantially to the ETF’s overall return.
Strong Fundamentals Support Future Dividend Growth
The appeal of SCHD’s energy holdings goes beyond the current oil price rally. Both Chevron and ConocoPhillips project strong free cash flow growth, which underpins their ability to continue boosting dividends.
Chevron anticipates its free cash flow to grow over 10% annually through 2030, assuming oil prices average $70 a barrel. ConocoPhillips expects to add approximately $7 billion more in annual free cash flow by 2029 under the same price scenario—nearly doubling last year’s level. These robust cash flows should allow them to sustain and increase their generous dividend payouts over time.
High-Octane Dividends and Returns Ahead
The energy sector’s resurgence has provided a "secret fuel source" for SCHD’s explosive start to 2026, turning around the fund’s fortunes amid a challenging market backdrop. Given the fund’s focus on dividend yield and growth, its high exposure to leading oil stocks positions it well for continued income and capital appreciation as long as oil prices remain supportive and the energy companies deliver on their dividend growth targets.
For income-focused investors, SCHD’s combination of high current yield, dividend growth, and strategic sector allocation offers an attractive opportunity in 2026 and beyond.
Matt DiLallo has been a contributing analyst for The Motley Fool since 2012, specializing in dividend stocks and energy sector investments. He holds an MBA from Liberty University and currently holds positions in Chevron, ConocoPhillips, and the Schwab U.S. Dividend Equity ETF.
The Motley Fool holds positions in and recommends Chevron, ConocoPhillips, and EOG Resources.
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- The Schwab U.S. Dividend Equity ETF Loaded Up on Energy Stocks. Here Are the Top 3 (June 7, 2025)
- This Top Dividend ETF Loves These Leading Oil Stocks. Should You Buy Them, Too? (March 30, 2025)
- Are There Any Dividend Buys as the S&P 500 Rallies? Yes, and Here They Are. (June 18, 2024)