In the vast landscape of exchange-traded funds (ETFs) in the United States, the dominance of three key players is evident. The SPDR family under State Street Global Advisors, iShares from BlackRock, and Vanguard are the titans of this financial sector. Vanguard, in particular, stands out because it boasts 17 out of the top 30 largest ETFs in the U.S. market by assets, which is a significant share. However, one notable exception to this trend is the Schwab US Dividend Equity ETF.

Launched on October 20, 2011, the Schwab US Dividend Equity ETF is managed by Schwab Strategic Trust and intends to replicate the performance of the Dow Jones U.S. Dividend 100 Index, which consists of 100 companies known for their solid records of paying dividends. As of June 17, 2022, the size of this ETF reached $33.4 billion, placing it 37th among U.S. ETFs. While not a giant in terms of assets compared to those from Vanguard and others, it is the largest ETF issued by a provider outside of those three major players. Moreover, the ETF has demonstrated remarkable investment returns since its inception, boasting an annualized return of 14% up until 2021. This performance is even more impressive when compared to similar ETFs focused on large-cap dividend stocks. For example, the Vanguard Dividend Appreciation Index ETF (VIG) has been tracking the NASDAQ US Dividend Achievers Select Index since its inception in 2006 and has delivered an annualized return of 10% since then. ProShares S&P 500 Dividend Aristocrats ETF (NOBL), which has been trading since 2013, has yielded an annualized return of 12%. In this comparison, the Schwab US Dividend Equity ETF continues to shine with its superior investment strategy.

The ETF's performance has not only been stellar in terms of returns but also in its asset growth. By December 2, 2022, the Schwab US Dividend Equity ETF saw its size swell to approximately $44.964 billion, which represented a nearly 35% increase from June. Notably, this growth is reflected in its trading price as well. On June 17, 2022, shares of the ETF closed at $69, with the lowest price over the previous six months being just $65.96. By early December, the share price had climbed above $75, even approaching $80 at its peak, showcasing a significant rise of 16% over this period.

Furthermore, the Schwab US Dividend Equity ETF has consistently outperformed its peers. Data indicates positive returns over various time frames: 5.69% over one month, 11.13% over two months, 7.80% over three months, and a modest 1.05% over 52 weeks. When examining longer-term cumulative returns, it becomes even clearer just how strong its performance has been, registering cumulative returns of 36.76% over three years and 53.98% over five years according to public records.

In terms of sector allocation, the Schwab US Dividend Equity ETF mirrors the index it tracks. As of December 2, 2022, significant sectors with allocation ratios exceeding 5% included Financial Services, Industrials, Technology, Consumer Staples, Health Care, Consumer Discretionary, and Energy, with allocations reported at 20.34%, 16.68%, 16.25%, 13.59%, 13.05%, 7.58%, and 5.39%, respectively.

Dividends and stock buybacks are commonly regarded as critical engines of the U.S. stock market's prolonged bull run. Investing in dividend-paying stocks can be a solid strategy for generating passive income and building a robust investment portfolio. However, for individual investors, selecting the right stocks often proves to be a challenging endeavor, particularly since many people lack the expertise to analyze corporate financial statements deeply or engage in extensive research. This is where dividend-focused ETFs come in handy; they allow investors to make consistent investments and wait patiently without the need for stock picking. Not only can they enjoy capital appreciation, but they also benefit from dividend income that is paid out quarterly or annually.

As a result of sustained inflows from investors, dividend ETFs have seen considerable price appreciation above the market averages. According to recent reports, in October, the Schwab US Dividend Equity ETF, Vanguard High Dividend Yield Index ETF Shares, iShares Core Dividend Growth ETF, and Vanguard Dividend Appreciation Index ETF saw price increases of 6.8%, 7.2%, 6.2%, and 6.1%, respectively. Collectively, these four ETFs attracted inflows totaling $1.86 billion, with the Schwab US Dividend Equity ETF alone recording net inflows of $814 million. In a broader context, during the first ten months of 2022, while the S&P 500 Index fell nearly 20%, these dividend ETFs exhibited greater resilience, with declines of only 11.1%, 8.2%, 14.2%, and 15.3% respectively, indicating that whether in a gently rebounding market or a downtrend, dividend ETFs have outperformed the broader market.

One of the most significant disruptions in the U.S. capital markets in 2022 stemmed from the Federal Reserve's interest rate hikes. Beginning on March 17, when the first increase occurred, the largest ETF, SPDR S&P 500 ETF, experienced a net outflow of funds, accumulating to a staggering $1.65 billion by the end of September. Conversely, the five largest dividend ETFs recorded a cumulative net inflow of $17.87 billion during the same period, with the Schwab US Dividend Equity ETF alone seeing net inflows of $6.85 billion, showcasing an undeniable preference for dividend strategies among investors during tumultuous times.