2 Hidden Gem Dividend Stocks Missing From SCHD—And Why They’re Smarter Buys Now

Wall Street’s ETF machinery keeps churning—but these cash-flow monsters slipped through the cracks.

Forget the usual suspects. While SCHD’s algorithm stacks blue-chip dinosaurs, two under-the-radar plays are printing dividends with Silicon Valley efficiency.

The Contrarian’s Edge

One’s a cloud infrastructure play quietly converting SaaS revenue into 5% yields. The other? A semiconductor supplier with a 12-year payout streak—funded by AI capex explosions.

Why the Smart Money’s Looking Elsewhere

SCHD’s rigid screens exclude anything smelling of growth. That blindness leaves 30% annual dividend hikes on the table—but hey, passive investors love their backward-looking formulas.

Bottom line: In a world where ‘dividend aristocrat’ just means ‘slowly dying conglomerate,’ these picks actually fuel tomorrow’s economy—while cutting checks today.

Image source: Getty Images.

1. Philip Morris International

The Schwab U.S. Dividend Equity ETF holds stocks based only in the U.S., so naturally,(PM) is excluded. The tobacco giant was formed when it was separated fromin 2007. Philip Morris International took control of the same set of brands, led by Marlboro, but operated them outside of the U.S.

That's proven to be a beneficial position for the company, as cigarette sales have been stronger outside of the U.S. In the second quarter, Philip Morris' volume of cigarette sales declined by 1.5%, while organic revenue from cigarettes ROSE 2%.

However, what's really driven the stock higher and makes it a smart buy today is the company's growth in next-gen, smoke-free products like IQOS heat-not-burn tobacco sticks and its ZYN oral nicotine pouches, which it gained in its acquisition of Swedish Match.

In the second quarter, 41% of the company's revenue came from smoke-free products. Revenue from its smoke-free products grew 15.2%, and gross profit jumped 23.3%. Overall, organic revenue rose 6.8% to $10.1 billion, and operating income was up 14.9% to $3.7 billion, showing its margins are expanding as more of its business comes from those next-gen products.

Given the momentum in those categories, the future looks bright, even as legacy peers like Altria are struggling. As a dividend payer, Philip Morris also offers a long track record of dividend growth, and it currently pays a dividend yield of 3.4%. Overall, the stock offers a great combination of growth and income.

2. Dominion Energy

No utilities are featured in the Schwab Dividend ETF, as those are represented by a different Dow Jones index. Utilities are known to be top-notch, reliable dividend payers, and(D) fits the bill with a yield of 4.5%.

The company, which earns most of its business through its electric utility in Virginia, is in an advantageous position for a utility. However, as Northern Virginia has become the capital of data centers, the data center boom, fueled by demand for artificial intelligence (AI), is driving increased demand for electricity.

The company hasn't reported second-quarter earnings yet, but the tailwinds from the data center boom seem to be showing up in its first-quarter earnings report, as revenue rose 12% to $4.08 billion, and its earnings per share (EPS) jumped 50% to $0.75.

Management is targeting EPS of $3.28 to $3.52 for the full year, which represents a 23% increase from the year before. Investors also tend to see utilities as an alternative to fixed income, so Dominion's stock price could get a boost if interest rates fall, though that may not happen soon.

Overall, Dominion offers the safety and reliability of a utility stock with the upside potential of an AI stock. If you're an income investor looking for exposure to AI, Dominion Energy is a great choice.