2 Top-Tier Dividend ETFs that Complement Each Other Well to Invest in Right Now
Key Points
The Schwab U.S. Dividend Equity ETF uses strict criteria to screen companies before including them.
The Vanguard Dividend Appreciation ETF holds more tech stocks than you'd expect.
The Schwab ETF has always provided investors a higher dividend yield than its Vanguard rival.
- 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›
Dividend ETFs can be some of the most productive parts of anyone's portfolio because you have guaranteed income (without the risks that come with individual stocks), as well as the chance for stock price appreciation. It's a two-for-one win in many cases.
For many people, one dividend ETF is enough to get the job done, but two popular dividend ETFs complement each other well and can be productive pieces in your portfolio. They're the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) and the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG). If you're able to invest in both, you can get exposure to the best of both dividend worlds.
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now, when you join Stock Advisor. See the stocks »
Image source: Getty Images.
Approaching dividends from different angles
A good dividend ETF does more than just look for companies with the highest yields and put them together in a fund. They have set methodologies for choosing companies that make their specific fund unique. SCHD emphasizes "high-quality" companies. To be eligible, a company must check the following boxes:
- 10 consecutive years of dividend increases
- A good financial standing (good cash flow compared to debt, a good return on equity, etc.)
- Be a minimum size and have high liquidity
VIG places greater emphasis on companies with impressive dividend growth records. That doesn't mean it doesn't care about quality. A company must still be in good financial health and show dividend consistency. However, its approach means its make-up is a bit different than SCHD and others. Here is how the two ETFs are divided by sector:
| Sector | Percentage of VIG | Percentage of SCHD |
|---|---|---|
| Information technology | 28.4% | 11.1% |
| Financials | 20.3% | 9.0% |
| Healthcare | 16.5% | 18.8% |
| Consumer staples | 9.5% | 19.4% |
| Industrials | 11.7% | 11.5% |
| Consumer discretionary | 4.2% | 6.4% |
| Energy | 3.1% | 16.9% |
| Materials | 3.4% | 0.0% |
| Utilities | 2.9% | 0.04% |
| Communication services | 0.0% | 6.9% |
Data sources: Vanguard and Charles Schwab. Percentages as of May 31.
Why these ETFs complement each other well
SCHD has consistently offered a higher dividend yield than VIG and, ironically, has increased its dividend by much more over the past decade (143% versus 87%).
SCHD Dividend Yield data by YCharts
What VIG has going for it, though, is that it has been much better for stock price appreciation due to its concentration in tech stocks. VIG's top three holdings are Broadcom, Apple, and Microsoft, all of which have grown impressively over the years.
SCHD's top three holdings are Texas Instruments, Qualcomm, and UnitedHealth Group, which have also grown impressively, but not at the consistent rate of the big-name tech stocks that VIG holds.
By investing in both SCHD and VIG, you get the high guaranteed income that comes with SCHD and the stock appreciation opportunities that come with VIG. Having both in your portfolio is the best of both worlds, and you don't have to worry about too much overlap between them.
Should you buy stock in Schwab U.S. Dividend Equity ETF right now?
Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $417,305!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,293,148!*
Now, it’s worth noting Stock Advisor’s total average return is 936% — a market-crushing outperformance compared to 209% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
See the 10 stocks »
*Stock Advisor returns as of June 21, 2026.
Charles Schwab is an advertising partner of Motley Fool Money. Stefon Walters has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Apple, Broadcom, Microsoft, Qualcomm, Texas Instruments, and Vanguard Dividend Appreciation ETF. The Motley Fool recommends Charles Schwab and UnitedHealth Group and recommends the following options: short June 2026 $97.50 calls on Charles Schwab. The Motley Fool has a disclosure policy.
Recommended Articles
