Schwab vs Vanguard: Which is the Better Dividend ETF?

The Vanguard Dividend Appreciation ETF (NYSEMKT:VIG) and the Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD) differ most in dividend yield, sector tilts, and portfolio concentration, with SCHD offering a higher payout and heavier exposure to energy and consumer defensive stocks.

Both VIG and SCHD aim to capture the long-term benefits of dividend-paying U.S. stocks, but their approaches and resulting portfolios diverge in important ways. This comparison looks at cost, returns, risk, liquidity, and portfolio makeup to help investors decide which style may fit their needs.

Snapshot (cost & size)

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 funds are low-cost, with SCHD charging 0.02 percentage points more, but SCHD stands out with a notably higher dividend yield—more than double that of VIG. For investors who value income, this difference may be material.

Performance & risk comparison

What's inside

SCHD tracks 101 dividend-oriented U.S. stocks, focusing on quality and sustainability of payouts. Its sector exposure leans heavily toward energy (20%), consumer staples (18%), and healthcare (16%), reflecting a more defensive tilt. Top holdings include Lockheed Martin (NYSE:LMT), Bristol Myers Squibb, (NYSE:BMY) and Texas Instruments (NYSE:TXN). With a fund age of 14.3 years, SCHD is well established but more concentrated than many broad dividend ETFs.

VIG, by contrast, holds 338 stocks and emphasizes technology (27%), financial services (22%), and healthcare (17%). Its largest positions are Broadcom Inc (NASDAQ:AVGO), Microsoft Corp (NASDAQ:MSFT), and Apple Inc (NASDAQ:AAPL). This broader, tech-tilted portfolio delivers more diversification, but with a lower yield and slightly higher beta than SCHD.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

These are two excellent dividend ETFs from two top-notch asset management firms. But they are significantly different in terms of what they offer investors. Which one you prefer depends on what you are looking for.

The Schwab ETF is more concentrated and focuses on dividend yield, which is the percentage of the price that goes to the dividend. The Schwab ETF’s 30-day yield is pretty high at 3.44%. It has a high yield because it tracks the Dow Jones U.S. Dividend 100 Index, which consists of the largest, most stable, dividend-producing blue chip stocks.

The Vanguard ETF casts a broader net, tracking the S&P U.S. Dividend Growers Index. This index includes stocks that have a record of growing their dividends every year. Because the focus is more on dividend growth rather than higher yields, its 30-day yield is lower at about 1.55%. However, it typically includes more growth-oriented and technology stocks, so it has a better return.

It has returned 12.7% over the past 12 months and has averaged a 12.4% return over the past five years. The Schwab ETF has returned 11.3% over the past year and 10.9% over the past five years.

The expense ratios are low for both, with Vanguard’s a bit lower at 0.04% to Schwab’s 0.06%. I’d favor the Schwab ETF as the better dividend ETF, because it generally produces more dividend income, and the returns are not all that different.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Bristol Myers Squibb, Chevron, Microsoft, Texas Instruments, and Vanguard Dividend Appreciation ETF. The Motley Fool recommends Broadcom and Lockheed Martin. The Motley Fool has a disclosure policy.