The Schwab U.S. Dividend Equity ETF (SCHD) Offers a Higher Yield and Lower Cost Than the iShares Core High Dividend ETF (HDV)

The iShares Core High Dividend ETF (NYSEMKT:HDV) and the Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD) both focus on U.S. dividend stocks, but SCHD stands out for its lower cost, higher yield, and much larger assets under management, while HDV has shown stronger recent returns.

Both the iShares Core High Dividend ETF and the Schwab U.S. Dividend Equity ETF aim to deliver consistent dividend income from U.S. equities, but they differ in stock selection and weighting approaches. This comparison explores how their fees, size, sector exposure, performance, and risk stack up for investors considering a U.S. dividend ETF.

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.

SCHD is slightly more affordable, with a 0.06% expense ratio compared to HDV’s 0.08%, and it also offers a higher dividend yield of 3.8% versus HDV’s 3.1%, which may appeal to income-focused investors.

Performance & risk comparison

What's inside

SCHD tracks a portfolio of 103 U.S. dividend payers, with significant exposure to energy (20%), consumer defensive (18%), and healthcare (16%) sectors. Top holdings include Amgen (NASDAQ:AMGN), Abbvie (NYSE:ABBV), and Cisco Systems (NASDAQ:CSCO). The fund has a 14.1-year track record and is one of the most popular U.S. dividend ETFs by assets under management.

HDV selects 75 stocks, with an even heavier tilt to consumer defensive (25%), energy (22%), and healthcare (20%). Its largest positions are Exxon Mobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), and Chevron (NYSE:CVX). Both funds avoid leverage, currency hedging, and other structural quirks, but their sector weights and top holdings show subtle differences.

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

Foolish take

The Schwab U.S. Dividend Equity ETF and the iShares Core High Dividend ETF both offer exposure to dividend-paying stocks, but the returns they've provided haven't been the same. The Schwab US Dividend Equity ETF delivered a total return of 199.5% over the past 10 years. The iShares Core High Dividend ETF underperformed with a total return of just 143.1% over the past decade.

Income-seeking investors who bought shares of the iShares Core High Dividend ETF have been more than a little disappointed with the growth of their payouts. Its latest quarterly payment was just 2.85% higher than the payment it issued five years ago. This ETF tracks the Morningstar Dividend Yield Focus Index.

The Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 Index, which is more focused on dividend growth and sustainability. The focus on dividend growers helped its dividend payout rise by 29.9% over the past five years.

Investors seeking a pure focus on high yields at the moment might find the iShares Core High Dividend ETF more to their liking. If maximizing your returns over the long run is your main goal, though, the Schwab U.S. Dividend Equity ETF is the better option.

Glossary

ETF: Exchange-traded fund; a pooled investment fund traded on stock exchanges like a stock.
Expense ratio: The annual fee, as a percentage of assets, that a fund charges its investors.
Dividend yield: Annual dividends paid by a fund or stock divided by its current price, expressed as a percentage.
Assets under management (AUM): The total market value of assets that 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 observed percentage drop from a fund's peak value to its lowest point over a period.
Sector exposure: The proportion of a fund's assets invested in specific industry sectors, such as energy or healthcare.
Track record: The length of time a fund has been operating, used to assess its historical performance.
Leverage: The use of borrowed money to increase the potential return of an investment.
Currency hedging: Strategies used by funds to reduce the impact of currency fluctuations on returns.
Total return: The investment's price change plus all dividends and distributions, assuming those payouts are reinvested.
Weighting: The method a fund uses to determine how much of each asset it holds in its portfolio.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie, Amgen, Chevron, and Cisco Systems. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.