If You Like the Schwab U.S. Dividend Equity ETF, You'll Love This ETF to Pair With It.

Ask income seekers which dividend equity ETF they like best, and you'll probably hear a lot of them say the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD).

It happens to be my favorite, too. Its selection strategy, which considers dividend growth history, balance sheet fundamentals, and yield, does a strong job of identifying the "best of the best" dividend stocks by letting no potential red flag slip through the cracks.

If there's one downside, it's that the fund only invests in U.S. stocks. That leaves an entire universe of dividend stocks untouched, including many that have performed quite well over the past year.

That's why the Schwab International Dividend Equity ETF (NYSEMKT: SCHY) is the ideal pairing for the Schwab U.S. Dividend Equity ETF. It uses a substantially similar strategy and allows investors to create a global portfolio of high-quality, high-yield dividend stocks.

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SCHY is the international version of SCHD

The Schwab International Dividend Equity ETF uses a selection methodology familiar to SCHD shareholders.

To qualify for SCHY, a stock must have paid dividends for at least 10 consecutive years. A composite score is then created for each qualifying component, considering factors such as cash flow-to-total debt, return on equity (ROE), dividend yield, and five-year dividend growth rate. An additional volatility screen gets applied before the final portfolio of 100 stocks is created.

The greatest appeal of this fund is its comprehensive selection process. Choosing dividend stocks based solely on yield or dividend growth history can create issues, such as yields that are too low or unsustainable. Considering all of these selection factors together helps mitigate the risk of bad apples sneaking into the portfolio.

How to pair SCHD and SCHY in a dividend portfolio

Those two ETFs could be paired together in a portfolio much in the same way that you'd pair two broad U.S. and international stock funds.

For a younger investor, that could mean 75% invested in the Schwab U.S. Dividend Equity ETF and 25% in the Schwab International Dividend Equity ETF. People closer to retirement may want to keep more of their money invested in U.S. stocks. Your exact allocation will be heavily dependent on your personal circumstances and risk tolerance.

The clearer one is that they both do a strong job of delivering high dividend income. SCHY currently yields 3.7% and should be sustainable, given that it's backed by companies with solid balance sheets and a commitment to their dividends. It's the same thing that SCHD offers, but with a slightly higher yield.

If the Schwab U.S. Dividend Equity ETF is a cornerstone in your portfolio, the Schwab International Dividend Equity ETF deserves equal consideration.

David Dierking has positions in Schwab U.S. Dividend Equity ETF. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.