SCHD Is Up 20% and Offers Investors a Compelling Yield. But These 3 Dividend Stocks Could Be Even Better Buys Now.

Schwab U.S. Dividend Equity ETF (SCHD) is up roughly 20% in 2026, outperforming the S&P 500's approximately 13% gain, while offering a 3.0% dividend yield. The article suggests income investors supplement SCHD with PepsiCo at a historically elevated 4.5% yield, Enterprise Products Partners at a 5.8% distribution yield backed by fee-based energy infrastructure, and Realty Income at a 5.8% yield with 31 consecutive years of annual dividend increases. SCHD excludes MLPs and REITs, leaving Enterprise and Realty Income as potential higher-yield portfolio additions.

Analysis

The relevant distinction is not headline yield but the source of distributable cash flow and the marginal buyer base. SCHD’s rules systematically underweight rate-sensitive real estate and partnership structures, leaving a structural allocation gap that can support EPD and O when income allocators rotate out of broad dividend ETFs; conversely, it avoids the tax/reporting and financing frictions that limit MLP ownership by some institutions. PEP is the cleaner idiosyncratic opportunity because its elevated income appeal can coincide with a consumer-staples rerating if volume trends and productivity improve, rather than merely tracking rates.

For O, the key variable over the next 1-3 months is the long-end Treasury yield plus REIT credit spreads, not the monthly dividend cadence. A lower-risk-rate regime improves acquisition accretion and equity valuation simultaneously, while a renewed upward move in real yields would pressure the multiple even if operating metrics remain intact. EPD’s apparent insulation from commodity prices is incomplete: sustained weak NGL volumes, narrower processing economics, or lower producer activity can eventually reduce growth-capex returns, although its contracted base should make the earnings path less volatile than CVX.

Consensus may be too quick to treat high yield as a substitute for total return. O and EPD can outperform in a rate-cutting or income-scarcity regime, but both have limited near-term upside if capital costs remain elevated; PEP offers the more asymmetric 6-18 month setup if management demonstrates that growth stabilization does not require incremental promotional spending. The thesis is falsified by PEP cutting organic-growth or margin guidance, O losing investment-grade funding flexibility or seeing AFFO/share dilution, or EPD showing distribution coverage deterioration alongside lower project backlog.

Key Decisions for Investors

• Initiate a measured long PEP versus XLP over a 6-12 month horizon only after the next earnings report confirms stable volume and gross-margin recovery. Target 10-15% relative upside from a defensive rerating; exit if management reduces full-year organic sales or operating-margin guidance.
• Use O as a tactical rates expression rather than a standalone yield purchase: add on a sustained decline in the 10-year Treasury yield and narrowing REIT spreads, with a 1-3 month holding period. Risk/reward is attractive only if acquisition funding remains accretive; stop the thesis on a material AFFO/share dilution signal or a sharp reversal higher in long rates.
• Maintain or initiate EPD as the higher-quality midstream income allocation versus CVX for 6-18 months, sized for partnership-liquidity and investor-base constraints. Favor EPD if NGL export volumes and project execution remain intact; reassess on weakening distribution coverage, delayed major projects, or producer-capex cuts that threaten throughput growth.
• Do not chase SCHD after relative outperformance solely for yield. Treat it as a diversified core holding, but monitor whether factor leadership rotates back toward mega-cap growth; a renewed widening of SCHD’s relative performance gap without corresponding earnings revisions would argue for trimming rather than adding.