Building Dividend Income: A Steadier Approach or a Higher-Paying One With VYM and SCHD
Key Points
Vanguard High Dividend Yield ETF charges a slightly lower expense ratio, while Schwab U.S. Dividend Equity ETF delivers a higher dividend yield
VYM has delivered a stronger 1-year return and higher 5-year growth, but SCHD leans more into energy and consumer defensive sectors
Both funds offer deep liquidity and low trading friction, with no notable quirks or structural differences
- 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›
Vanguard High Dividend Yield ETF (NYSEMKT:VYM) and Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD) both target U.S. companies with healthy dividends, but VYM charges a marginally lower fee, while SCHD offers a higher yield and a more concentrated portfolio emphasizing energy and consumer defensive stocks.
Both the Vanguard High Dividend Yield ETF and Schwab U.S. Dividend Equity ETF are popular choices for dividend-focused investors seeking broad U.S. equity exposure. VYM tracks the FTSE High Dividend Yield Index, casting a wide net across nearly 600 holdings, while SCHD follows the Dow Jones U.S. Dividend 100 Index, focusing on fewer names with a quality and yield screen. This comparison highlights their cost, performance, risk, sector exposures, and practical trading details.
Snapshot (cost & size)
| Metric | VYM | SCHD |
|---|---|---|
| Issuer | Vanguard | Schwab |
| Expense ratio | 0.06% | 0.06% |
| 1-yr return (as of 2026-02-09) | 20.77% | 18.20% |
| Dividend yield | 2.33% | 3.51% |
| Beta | 0.78 | 0.71 |
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.
VYM is marginally more affordable with a 0.04% expense ratio, while SCHD costs 0.06%. SCHD may appeal to those seeking a higher payout, as its dividend yield is 1.1 percentage points higher than VYM's (3.4% vs. 2.3%).
Performance & risk comparison
| Metric | VYM | SCHD |
|---|---|---|
| Max drawdown (5 y) | (15.83%) | (16.86%) |
| Growth of $1,000 over 5 years | $1,616 | $1,409 |
What's inside
SCHD takes a more concentrated approach, holding 101 stocks primarily in the energy (19%), consumer defensive (18%), and healthcare (18%) sectors. Its largest positions include Lockheed Martin Corp (NYSE:LMT), Texas Instrument Inc (NASDAQ:TXN), and Chevron Corp (NYSE:CVX), with the fund offering over 14 years of history. This focus may suit investors who want dividend exposure with a tilt toward defensive and energy companies.
In contrast, VYM spreads its bets across 589 holdings with notable weights in financial services (21%), technology (18%), and healthcare (13%). Its top holdings are Broadcom Inc (NASDAQ:AVGO), JPMorgan Chase & Co (NYSE:JPM), and Exxon Mobil Corp (NYSE:XOM). The broader diversification may appeal to those seeking more sector balance and a larger number of underlying companies.
For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Dividend investors are not just buying yield. They are buying confidence in a paycheck that has to show up quarter after quarter, especially when markets are volatile. That is the real decision behind the Vanguard High Dividend Yield ETF and the Schwab U.S. Dividend Equity ETF, two popular choices that can feel similar until the market shifts.
VYM spreads income across hundreds of companies, so the dividend stream is supported by many sectors and business models. That range reduces dependence on any single market segment, but it also means accepting a lower yield today. SCHD is far more selective in comparison. It holds far fewer stocks screened for dividend strength, which can lift payouts, but it also concentrates results into fewer names and a more tilted sector mix.
For investors, VYM is a good fit when dividends are meant to be the steady background income of a long-term portfolio. SCHD fits well when you want a higher payout and are comfortable knowing more of your income comes from a smaller set of companies. Ultimately, the choice comes down to whether you want your dividend income to feel dependable in any market or if you are willing to concentrate it in exchange for a bigger check.
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JPMorgan Chase is an advertising partner of Motley Fool Money. Eric Trie has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron, JPMorgan Chase, Texas Instruments, and Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and Lockheed Martin. The Motley Fool has a disclosure policy.
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