SCHD vs. VYM: A Higher Yield Or High Total Return Potential
Key Points
SCHD and VYM charge the same low expense ratio, but SCHD offers a higher dividend yield
SCHD is more concentrated, with around 100 holdings versus VYM's more than 550 companies.
VYM has delivered stronger recent and five-year returns, while SCHD's higher yield may appeal to income-focused investors
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Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD) and Vanguard High Dividend Yield ETF (NYSEMKT:VYM) both target dividend-paying U.S. stocks, but differ in sector tilt, portfolio concentration, and yield.
Both SCHD and VYM are popular, low-cost options for investors seeking dividend income from U.S. equities. While they share a focus on high-yielding stocks, their approaches to sector allocation, number of holdings, and recent performance diverge, giving each its own appeal depending on investor priorities.
Snapshot (cost & size)
| Metric | VYM | SCHD |
|---|---|---|
| Issuer | Vanguard | Schwab |
| Expense ratio | 0.06% | 0.06% |
| 1-yr return (as of 2025-12-16) | 9.6% | (1.4%) |
| Dividend yield | 2.4% | 3.8% |
| AUM | $68.6 billion | $72.8 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year weekly returns. The 1-yr return represents total return over the trailing 12 months.
Both SCHD and VYM are equally affordable at a 0.06% expense ratio. However, SCHD stands out with a higher yield, offering a larger income stream for those focused on dividend payouts.
Performance & risk comparison
| Metric | VYM | SCHD |
|---|---|---|
| Max drawdown (5 y) | (15.85%) | (16.86%) |
| Growth of $1,000 over 5 years | $1,573 | $1,285 |
What's inside
SCHD tracks the Dow Jones U.S. Dividend 100 Index and holds approximately 100 stocks, with a portfolio concentrated in the energy (20%), consumer staples (18%), and healthcare (16%) sectors. Its top holdings include Merck (NYSE:MRK), Cisco Systems (NASDAQ:CSCO), and Amgen (NASDAQ:AMGN). Formed in 2011, SCHD may appeal to investors seeking a more yield-focused approach.
In contrast, VYM spreads its assets among over 565 companies, tilting toward financial services (21%), technology (14%), and healthcare (13%). Its largest positions are Broadcom (NASDAQ:AVGO), JPMorgan Chase (NYSE:JPM), and Exxon Mobil (NYSE:XOM). This broader diversification can help reduce risk, especially given its lower allocation to the more volatile energy sector (8%).
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What this means for investors
SCHD and VYM are heavyweights among ETFs focused on high-yield dividend stocks. They're the largest two funds focused specifically on higher-yielding dividend stocks by AUM.
However, they have distinct approaches. VYM invests broadly across the high-yield sector, holding over 550 companies. It tracks an index (FTSE High Dividend Yield Index) that measures the returns of U.S.-listed companies that pay high-yielding dividends (excluding REITs). It weights these companies based on their market caps. As a result, its top holding, semiconductor giant Broadcom, has an 8.7% weighting in the fund. Given this approach, the fund offers the highest allocation to the largest companies with higher dividend yields.
SCHD, on the other hand, tracks an index (Dow Jones U.S. Dividend 100 Index) that screens companies based on a quartet of dividend quality characteristics, including dividend yield and five-year dividend growth rate. This methodology gives a higher allocation to the highest quality dividend stocks (Merck currently leads the way to 4.8%).
Given these differences, VYM is best for those seeking broad exposure to higher-yielding dividend stocks with a higher allocation to the best companies. SCHD, on the other hand, is a better option for investors seeking a fund geared towards holding the highest quality, high-yielding dividend stocks.
Glossary
ETF: Exchange-Traded Fund; a pooled investment fund traded on stock exchanges, holding a basket of assets.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges to cover operating costs.
Dividend yield: Annual dividends paid by a fund or stock, expressed as a percentage of its current price.
Sector tilt: When a fund allocates more assets to certain industries or sectors than others.
Portfolio concentration: The degree to which a fund's assets are invested in a small number of holdings.
AUM: Assets Under Management; the total market value of assets a fund manages on behalf of investors.
Beta: A measure of a fund’s volatility compared to the overall market, typically the S&P 500.
Max drawdown: The largest percentage drop from a fund’s peak value to its lowest point over a specific period.
Total return: The overall return of an investment, including price changes and all dividends or distributions.
Index tracking: When a fund aims to replicate the performance of a specific market index.
Diversification: Spreading investments across various assets or sectors to reduce overall risk.
Sector-specific risk: The risk associated with investments concentrated in a particular industry or sector.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Matt DiLallo has positions in Broadcom, JPMorgan Chase, and Schwab U.S. Dividend Equity ETF. The Motley Fool has positions in and recommends Amgen, Cisco Systems, JPMorgan Chase, Merck, and Vanguard Whitehall Funds - Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
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