Annual reconstitution shake‑up: Dropped AbbVie, added UnitedHealth. Healthcare jumps to the #2 sector weight.
The well‑known dividend ETF – Schwab U.S. Dividend Equity ETF (SCHD) – recently completed its annual reconstitution. One notable change: it is quietly increasing its exposure to the healthcare sector, pushing two healthcare giants into its top‑10 holdings.
Healthcare stocks are becoming the new favorite of this high‑yield dividend ETF.
SCHD tracks the Dow Jones U.S. Dividend 100 Index, which screens stocks annually based on dividend yield, 5‑year dividend growth rate, financial strength, and other quality metrics.
This year’s changes:
| Action | Stock | New Weight |
| ✅ New to top 10 | UnitedHealth (UNH) | 4.0% |
| ✅ New to top 10 | Abbott Laboratories (ABT) | 3.95% |
| ❌ Dropped from top 10 | AbbVie (ABBV) | Previously 3.31% |
Note: Legacy healthcare holdings Merck and Amgen remain in the top 10.
After this reconstitution, healthcare has become SCHD’s second‑largest sector, trailing only consumer staples.
| Sector | Pre‑reconstitution Weight | Post‑reconstitution Weight |
| Healthcare | 15.4% | 18.9% |
This is a clear sector tilt – the ETF manager believes that high‑yield healthcare dividend stocks currently offer a rare combination of income and growth.
In the near term, the ETF’s dividend yield remains unchanged at 3.4% (roughly triple the S&P 500’s yield).
But the more important metric for long‑term investors is dividend growth rate:
| Metric | Pre‑reconstitution | Post‑reconstitution |
| Avg. 5‑year dividend growth rate | 8.6% | 9.4% |
The newly added UnitedHealth and Abbott have significantly faster dividend growth than the dropped AbbVie:
The takeaway: Holding SCHD now offers a path to faster future dividend growth, which can drive higher total returns over time.
To be clear, AbbVie itself remains a top‑tier dividend stock:
However, the ETF’s reconstitution logic places a premium on marginal improvement in growth rates. Abbott and UnitedHealth edged ahead on dividend growth, so they were prioritized for inclusion.
Meanwhile, Merck (16 straight years of dividend increases, 5‑year growth rate 5.8%) and Amgen (13 straight years, 5‑year growth rate 8.3%) remain in the top 10, serving as the bedrock of the healthcare allocation.
| Investor Profile | Why It Matters |
| Seeking stable cash flow | 3.4% dividend yield – far above the S&P 500 |
| Focus on long‑term dividend growth | Post‑reconstitution 5‑year growth rate rose to 9.4% |
| Bullish on healthcare | Defensive sector with essential demand and consistent payouts |
SCHD’s move into healthcare isn’t speculation – it’s swapping slightly slower growers for faster growers. For investors who want both income and upside potential, this ETF’s “healthcare tint” is becoming deeper and more attractive.
