This Top Dividend ETF Is Relying on These Stocks to Fuel Its High-Yielding Payout

Dividend ETFs are betting big on traditional stocks—meanwhile, crypto yields are quietly eating their lunch.

Heavy Hitters Driving Returns

While legacy funds chase incremental gains, decentralized protocols are delivering double-digit APY without the middleman cut. The old guard's 'high yield' looks downright conservative compared to DeFi's real-time compounding.

Yield Mechanics Exposed

Traditional dividend structures can't compete with algorithmic stablecoin farms or liquid staking rewards. Why wait for quarterly distributions when you can earn yield 24/7/365?

Future-Proof Income Strategies

Smart money's already diversifying into crypto-native yield instruments. The real high-yield play isn't in yesterday's stocks—it's in tomorrow's tokenized cash flows.

Funny how the 'top' dividend ETF still can't beat a basic staking wallet. Maybe they should try updating their playbook from the dial-up era.

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Drilling down into the Schwab U.S. Dividend Equity ETF's holdings

The Schwab U.S. Dividend Equity ETF aims to track the Dow Jones U.S. Dividend 100 Index. This index focuses on four key dividend quality characteristics to ensure it only holds companies with a proven record of financial strength and dividend reliability:

• Cash flow to debt.
• Return on equity.
• Indicated dividend yield.
• Five-year dividend growth rate.

The index reconstitutes its holdings annually, removing dividend stocks that no longer meet its high standards and replacing them with higher-quality dividend stocks. At its last annual reconstitution in March, the fund added 22 stocks, including five energy companies. At the time, its 100 holdings had an average dividend yield of 3.8% and had grown their payouts at an 8.4% annual rate over the past five years. As a result of this change, the energy sector currently holds the highest allocation in the fund, accounting for over 19% of its assets.

This high allocation is notable because, currently, the energy industry offers some of the most attractive dividends. It features the highest average dividend yield among theat 3.4%, nearly triple the index's 1.2% average. This high average yield is a result of low valuations and a strong focus on dividends among leading energy stocks.

High-octane dividend stocks

The Schwab U.S. Dividend Equity ETF currently holds a dozen energy stocks led by(CVX -1.71%). The global oil giant is its second-largest holding, accounting for 4.4% of its assets. Chevron certainly checks all the boxes. It has a 4.4% dividend yield and has increased its payout for 38 straight years, including growing it at an industry-leading pace over the past decade. Chevron also has one of the strongest balance sheets in the oil sector. The oil company is in an excellent position to continue growing its dividend as its recent acquisition of Hess enhanced and extended its production and free cash FLOW growth outlook into the 2030s.

Next on the list is oil and gas producer(COP -1.82%). It's the fund's fourth largest holding at a 4.2% allocation. ConocoPhillips currently has an above-average dividend yield of 3.4%. It has also grown its dividend at a robust rate in recent years -- over 80% during the past five years. The oil company's target is to deliver dividend growth within the top 25% of companies in the S&P 500 going forward. It's in a strong position to deliver on that goal as it expects to produce over $7 billion in incremental annual free cash Flow by 2029 as its current slate of long-term projects comes online.

Oil and gas producers aren't the only energy stocks held by this fund. For example, it has a 1.8% allocation to energy infrastructure company (OKE -2.66%). The pipeline company has a robust 5.8% dividend yield. It backs its payout with stable cash flow, as 90% comes from fee-based sources. Oneok has delivered over a quarter century of dividend stability and growth. While it hasn't raised its payment every year, it has delivered peer-leading dividend growth over the past decade. Oneok aims to increase its high-yielding dividend by 3% to 4% per year. Achieving that target shouldn't be a problem, considering that it has organic expansion projects in the backlog that are on track to come online through 2028.

Giving this ETF the fuel to pay an attractive and growing dividend

Energy stocks are a key contributor to the Schwab U.S. Dividend Equity ETF's ability to pay a high-yielding and steadily rising dividend. Top energy stock holdings, such as Chevron, ConocoPhillips, and Oneok, have a long history of paying attractive and growing dividends. With more dividend growth ahead, they should give this ETF the fuel to continue supplying investors with more dividend income.