US 10-Year Treasuries at 5.3% vs. Schwab Dividend ETF at 3.4%: Where to Invest

Yahoo Finance · 2026-10-07

At the beginning of the month, 10-year Treasury yields reached their highest mark since 2002, offering income-seeking investors a guaranteed 5.3% return backed by the U.S. government after a long era of ultra-low rates. Meanwhile, due to a surging stock market, dividend yields remain constrained. The Schwab U.S. Dividend Equity ETF (SCHD) currently offers a 30-day SEC yield of 3.4%. This popular fund invests in premium dividend growth companies characterized by robust balance sheets and strong free cash flow. Its historical performance reflects this strength, as its split-adjusted payout grew from $0.27 per share in 2012 to $1.0541 per share over the past twelve months, translating to an annualized growth rate of 9.7%, alongside a 7.2% average yearly increase over the last five years. While Treasuries guarantee principal repayment if held to maturity, the Schwab ETF consists of equities that inherently experience market fluctuations.

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The U.S. 10-year Treasury yield hit 5.3%, the highest since 2002, drawing the attention of income investors. Meanwhile, due to rising stock prices, the dividend yield of Schwab's Dividend Equity ETF (SCHD) remains around 3.4%. Investors are now facing a dilemma between government-backed high-yield bonds and equity ETFs that carry principal volatility but offer dividend growth potential.

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Bonds — The 10-year Treasury yield reached 5.3%, the highest since 2002, concentrating demand from income investors seeking stable and high fixed income.

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Real Estate — As Treasury yields surge to the 5.3% level, borrowing costs relatively increase and the investment appeal of high-dividend assets such as real estate diminishes.

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As the 10-year Treasury yield offers an attractive risk-free return of 5.3%, the incentive for fixed-income-oriented capital to move into the bond market has grown. On the other hand, SCHD has recorded an average annual dividend growth rate of 7.2% over the past five years, providing an inflation hedge, though it entails stock price volatility risk.

If expectations for rate cuts re-emerge in the future, capital gains on bonds and stock dividend growth could become advantageous, so investors must closely monitor the Fed's monetary policy path and inflation indicators.

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