SCHD ETF stock: home to toxic firms that could slash dividends

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The Schwab US Dividend Equity ETF (SCHD) stock crashed to an investors focused on bank collapses and the moderately hawkish statement by the Federal Reserve. The SCHD stock price dropped to a low of $69.40, the lowest point since March 17th. In all, the fund has fallen by more than 10% from the year-to-date high, meaning it is now in a correction zone.

Schwab US Dividend Equity ETF has toxic assets

The main themes in the financial market this week were the collapse of regional banks and the relatively hawkish Fed statement. These events had a direct impact on the SCHD, which is one of the best-known ETFs in the world.

For example, the collapse of First Republic Bank on Monday led to fears of contagion in the banking sector. As I wrote in this article on Monday, there are concerns that other banks like Comerica, Zions, Western Alliance, and PacWest could collapse as well. As a result, the KRE ETF has fallen by over 14% in the past five days.

The collapse of these banks has an impact on the SCHD stock since it has a stake in several regional banks. It has smaller stakes in banks like M&T Bank, Regions Finance, Zions, Cathay General Bancshares, Northwest, OFG, Comerica, Premier Financial, and Synovus Financial. Comerica and Zions are some of the top banks at risk and could go out of business soon. Those regional banks that remain will likely be forced to lower their dividends.

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The other reason why the SCHD ETF is at risk is its stake in Paramount Global. Paramount stock price dived by more than 25% on Thursday after the company slashed its dividend. This is an important part for SCHD since the ETF is usually bought because of its dividends. 

Further, SCHD owns Chevron and Valero Energy, which are expected to have lower returns as oil and gas prices crash.

SCHD ETF stock forecast

SCHD chart by TradingView

The 4H chart shows that the Schwab Dividend Equity ETF has been in a strong sell-off lately. It has now tested the important support level at $69.46, the lowest level on March 15. It remains below the 50-period moving average and the 61.8% Fibonacci retracement level. Oscillators have continued falling. Therefore, the path of the least resistance for the ETF is lower with the next key support being at $60.

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