What Happens When an SCHD Company Stops Paying
SCHD removes a company straight away only if it stops paying its dividend, not if it cuts it. Under the rules of the Dow Jones U.S. Dividend 100 Index, which SCHD tracks, a company is removed between annual reviews if it skips a scheduled dividend or announces that it will stop paying dividends.
A company that cuts its dividend but keeps paying something stays in the fund until the next annual review in March. At that point, the lower dividend counts against it on two of the four measures the index uses, and it may be removed then.
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This guide is part of FRC’s complete guide to SCHD, which starts with what SCHD is and how it works. It covers what happens to a company that cuts, skips or stops its dividend, and the companies that have been removed for it.
The Two Ways a Company Can Leave SCHD
Most companies leave SCHD at the annual reconstitution, which takes effect on the Monday after the third Friday of March. At that review, every eligible company is screened and ranked again, and companies that no longer qualify are replaced.
The second route is the monthly dividend review. S&P Dow Jones Indices checks dividend announcements every month, and removes any member that has omitted a scheduled dividend or announced that it will stop paying dividends.
The two routes work very differently. The annual review can remove a company for many reasons, including a lower yield or weaker finances, while the monthly review deals only with companies that have stopped paying.
What Counts as Stopping a Dividend
S&P Dow Jones Indices applies what it calls Approach C of its policies for dividend indices. Under this approach, a company can be removed between reviews if it omits a scheduled dividend payment, or if it announces that it will stop paying dividends for an undetermined period.
A dividend that is postponed or deferred, rather than cancelled, is treated differently. In general, no action is taken until the company makes a further announcement or the next rebalancing takes place.
Decisions are made by the index committee, which has some discretion. The rules describe what normally happens, but unusual cases, such as a company changing the timing of its payments, can be judged individually.
What Every SCHD Investor Needs to Know
Many investors assume SCHD sells any company the moment it cuts its dividend. It does not, and understanding the difference changes how you read the fund’s income.
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Why a Dividend Cut Does Not Trigger Removal
Under Approach C, a dividend cut on its own is not a reason for removal between reviews. A company that reduces its payment but continues to pay something remains in the index.
That can seem surprising for a dividend fund. The logic is that a cut is a change in amount, while a suspension is a break in payments, and SCHD’s index is built around companies with an unbroken record of paying.
The cut still has consequences. At the next March review, the lower dividend reduces the company’s indicated dividend yield and its five-year dividend growth rate, two of the four measures in SCHD’s composite score, and it may also push the company’s yield into the lower half of eligible stocks, where it cannot be selected at all.
How the Monthly Review Works
The monthly review uses company announcements made up to and including the 21st of each month, or the 18th in February. Any removals take effect before the market opens on the first business day of the following month.
S&P Dow Jones Indices announces the changes at least five business days in advance. That gives index funds such as SCHD time to prepare to sell the shares.
If a company announces a disqualifying change to its dividend shortly before the annual reconstitution, S&P Dow Jones Indices may simply exclude it from the new index rather than removing it separately. Either way, the company leaves the fund.
When the Monthly Review Began
The monthly dividend review has applied to SCHD’s index since July 2018, according to S&P Dow Jones Indices. Before then, a company that suspended its dividend could remain in the index until the next annual review.
The change came less than two years before the biggest test of the rule. When the pandemic struck in 2020, the monthly review allowed SCHD’s index to remove companies that suspended their dividends within weeks, rather than holding them until March 2021.
Companies Removed for Stopping Their Dividends
The clearest examples came in 2020. Comparing Schwab’s holdings lists from the end of February and the end of May 2020, Darden Restaurants, Macy’s, Nordstrom, Gap and Cracker Barrel were all removed after suspending their dividends during the pandemic.
All five were consumer businesses hit hard by lockdowns. Restaurants and department stores closed or saw sales collapse, and the companies suspended their dividends to preserve cash.
Those removals affected only a small part of SCHD. Five of its roughly 100 companies stopped paying, and the fund still paid around 17.6% more in dividends in 2020 than in 2019. FRC’s guide to how SCHD did in the 2020 crash covers the full story of that year.
Companies That Returned
A removal for stopping a dividend is not permanent. Once a company resumes paying and meets the index rules again, it can be added back at a future annual review.
Darden Restaurants and Cracker Barrel both returned at the 2023 reconstitution, three years after they were removed, according to Schwab’s holdings lists. Macy’s returned at the 2026 reconstitution.
Their return shows that a removal does not end a company’s chances. Once a company has resumed paying and passes every screen again, including the ten-year dividend record, it is treated like any other candidate at the annual review.
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A Dividend Cut Removed at the Annual Review
FMC, an agricultural chemicals company, shows the other route. According to press reports, it cut its dividend sharply in October 2025, but it was not removed between reviews, because it continued to pay a dividend.
It was removed at the March 2026 reconstitution instead. Comparing Schwab’s holdings lists from the end of February and the end of May 2026, FMC was among the 23 companies that left the fund.
S&P Dow Jones Indices does not publish reasons for individual removals. The cut would have reduced both FMC’s yield and its dividend growth score, which is how the annual review normally deals with companies that reduce their payments. FRC’s guide to SCHD’s 2026 reconstitution covers every change made at that review.
A Cut That Survived One Review
Paramount Global shows that a cut does not always lead to removal at the very next review. The company, formerly ViacomCBS, cut its quarterly dividend from 24 cents to 5 cents a share in early 2023, a reduction of around 80%.
Schwab’s holdings lists show Paramount was still in SCHD at the end of May 2023, after that year’s review, and was removed at the 2024 reconstitution. A cut announced close to the February measurement date, combined with the buffer for existing members, can mean a company survives one more review before the full effect of the lower dividend shows in its scores.
CenturyLink followed a similar path. It cut its dividend in early 2013, according to press reports at the time, and Schwab’s holdings lists show it leaving at the 2014 reconstitution rather than in 2013.
Intel Left Before Its Dividend Cut
Some summaries say Intel was removed from SCHD after cutting its dividend. Schwab’s holdings lists show otherwise: Intel was removed at the 2020 reconstitution, while its large dividend cut came in early 2023, years after it had left the fund.
Intel’s removal in 2020 came while it was still paying its full dividend. S&P Dow Jones Indices does not publish reasons for individual removals, but the timing shows the cut cannot have been the cause.
Other Reasons a Company Can Leave Between Reviews
Dividend suspensions are not the only reason a company can leave SCHD between annual reviews. Companies are also removed when they are taken over, delisted or go bankrupt.
Takeovers are the most common of these. Schwab’s holdings lists show AVX leaving in 2020 after it was acquired, MDC Holdings leaving in 2024 after its takeover by Sekisui House and several earlier examples, including Molex in 2013 and PartnerRe in 2016.
Spin-offs follow a separate rule. When a member spins off part of its business, the new company is added to the index temporarily and then removed once its shares have traded for at least a day, which is why Kyndryl, spun off from IBM, and Organon, spun off from Merck, appeared briefly in SCHD’s holdings before leaving.
What Happens to the Empty Place
Companies removed between reviews are not replaced until the next annual reconstitution. The index can therefore hold fewer than 100 companies for part of the year.
The weight of the removed company is spread across the remaining members. In practice, this means SCHD’s holdings count can drop below 100 between reviews and then return to around 100 in March.
This is one reason SCHD’s holdings count varies from one date to another. In the spring of 2020, after the pandemic removals, the fund held fewer than 100 companies until its next reconstitution added new ones.
Did SCHD Cut Its Own Dividend in 2026?
Some videos in 2026 claimed that SCHD itself had cut its dividend. SCHD’s June 2026 payment of $0.2525 a share was around 3% lower than the $0.2602 paid in June 2025, according to Schwab’s distribution history.
That was not a cut in the usual sense. SCHD does not set a fixed dividend; it passes on whatever its companies pay, so each quarterly payment moves with the timing and size of their dividends and with changes to its holdings, such as the 2026 reconstitution.
Taken together, SCHD’s first three payments of 2026 were around 0.8% higher than the same three in 2025. The fund has had several quarters below the same quarter a year earlier since 2013, while its annual total rose every calendar year from 2012 to 2025.
What This Means for SCHD’s Dividend
The rules give SCHD’s income two layers of protection. The monthly review removes companies that stop paying, so the fund does not keep holding companies that contribute nothing to its income.
The annual review then deals with companies whose dividends have weakened. A company that has cut its payment, or whose dividend growth has slowed, is likely to score worse on two of the four measures and may be replaced by a company with stronger dividends.
Neither layer guarantees the fund’s income. A dividend cut still reduces what SCHD receives until the next review, and quarterly payments can fall from one year to the next. SCHD’s June 2026 payment, for example, was around 3% lower than in June 2025. FRC’s guide to SCHD’s dividend explains how the fund’s payments work.
How the Rules Fit SCHD’s Record
The combination of the two reviews has supported a long record of rising income. SCHD’s annual dividend has risen in every calendar year from 2012 to 2025, including 2020, when five companies stopped paying, and 2022, when the S&P 500 fell 18.11%.
That record comes from the companies SCHD selects as much as from the removal rules. The index’s four-factor score favours companies with strong cash flow relative to debt and high returns on equity, which are less likely to need to cut or suspend their dividends. FRC’s guide to how SCHD chooses its stocks explains each measure.
FRC’s guide to SCHD’s dividend growth shows how much the fund’s payment has grown since 2012.
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Comparing SCHD With Dividend Growth Funds
Some dividend funds follow stricter rules. Funds built around dividend growth streaks, such as those tracking lists of companies with many consecutive years of increases, generally remove a company once it fails to raise its dividend.
SCHD’s index is less strict on that point. It requires ten consecutive years of payments, not increases, and it only removes companies between reviews if they stop paying altogether.
The trade-off is flexibility. SCHD can keep a company that holds its dividend flat for a year if its other measures remain strong, while a growth-streak fund would have to sell it, but SCHD also holds companies that cut their dividend until the next March review.
Common Mistakes About SCHD and Dividend Cuts
Assuming SCHD sells immediately after a cut. A cut alone does not trigger removal between reviews; only a skipped or stopped dividend does.
Assuming a removed company can never return. Darden, Cracker Barrel and Macy’s all returned after being removed in 2020.
Assuming SCHD requires dividend increases. It requires ten consecutive years of payments, and dividend growth is one of four scoring measures, not a requirement.
Assuming the rules protect the fund’s income completely. A cut still reduces what SCHD receives until the next review, and quarterly payments can fall.
Confusing a suspension with a cut. A company that reduces its dividend is still paying; only a skipped or stopped dividend triggers removal between reviews.
Thinking the ten-year rule removes companies that cut. The rule requires ten consecutive years of payments, so a company that cuts but keeps paying still passes it.
Assuming a cut means certain removal at the next review. Paramount Global stayed through one review after cutting its dividend by around 80%, before it was removed in 2024.
Common Questions
Does SCHD remove companies that cut their dividends? Not immediately. A dividend cut alone does not trigger removal between annual reviews, but it counts against the company at the next March reconstitution.
Does SCHD remove companies that stop paying dividends? Yes. A company that skips a scheduled dividend or announces that it will stop paying dividends is removed at the monthly dividend review.
How quickly is a company removed after suspending its dividend? Announcements up to the 21st of the month, or the 18th in February, are reviewed that month, and removals take effect before the open on the first business day of the following month, with five business days’ notice.
Which companies has SCHD removed for suspending dividends? Darden Restaurants, Macy’s, Nordstrom, Gap and Cracker Barrel were removed in 2020 after suspending their dividends during the pandemic.
Can a company return to SCHD after suspending its dividend? Yes. Darden Restaurants and Cracker Barrel returned at the 2023 reconstitution, and Macy’s returned in 2026.
Was FMC removed from SCHD for cutting its dividend? FMC cut its dividend sharply in October 2025, according to press reports, and was removed at the March 2026 reconstitution. S&P Dow Jones Indices does not publish reasons for individual removals.
Are removed companies replaced straight away? No. Companies removed between reviews are not replaced until the next annual reconstitution, so the index can hold fewer than 100 companies for part of the year.
When did SCHD’s index start removing companies monthly? The monthly dividend review has applied since July 2018.
Can SCHD remove a company between reviews for other reasons? Yes. Companies that are taken over, delisted or go bankrupt also leave between reviews, and spin-offs are held only briefly.
Was Intel removed from SCHD for cutting its dividend? No. Intel left SCHD at the 2020 reconstitution, while its dividend cut came in early 2023.
Was Paramount removed from SCHD after cutting its dividend? Paramount Global cut its dividend by around 80% in early 2023, stayed in SCHD through that year’s review and was removed at the 2024 reconstitution.
Did SCHD cut its dividend in 2026? SCHD’s June 2026 payment was around 3% lower than in June 2025, but its first three payments of 2026 together were around 0.8% higher than in 2025. SCHD passes on what its companies pay, so quarterly payments vary.
Does SCHD pay dividends monthly? No. SCHD pays dividends four times a year, normally in March, June, September and December.
What happens if a company postpones its dividend? A postponed or deferred dividend, rather than a cancelled one, generally leads to no action until the company makes a further announcement or the next rebalancing.
Your Portfolio Deserves an Educated Investor
SCHD removes a company between reviews only if it skips or stops its dividend. A company that cuts its dividend stays until the next March review, where the lower payment counts against it on yield and dividend growth.
Before buying another few shares of SCHD, consider investing in understanding the fund itself. How to Invest in SCHD examines its selection methodology, holdings history, dividend taxation and investment strategies, while FRC’s three progressive ETF programmes take you from how ETFs work to managing risk across everything you own. FRC’s programmes and memberships are open to everyone, whether you are investing $500 or $500,000.
Your money is already working in the market. Now make sure your knowledge is working just as hard, and know exactly what SCHD does when a company’s dividend is in trouble.
