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SCHD vs VIG: Which High Dividend ETF Is Best?

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We Compare SCHD vs VIG:

We are going to explore the difference between Schwab U.S. Dividend Equity ETF (SCHD) vs Vanguard Dividend Appreciation ETF (VIG)

Choosing between two funds can be difficult, but I will make it easy for you to decide between SCHD vs VIG.

SCHD vs VIG Comparison Graphic

 

SCHD vs VIG

The primary difference between SCHD and VIG is the company that offers the exchange-traded fund (ETF).  SCHD is offered by Charles Schwab while VIG is offered by Vanguard.  Another significant difference is the number of stocks in each, with VIG having 267 different companies in the index compared to 103 with SCHD.

SCHD is offered by Charles Schwab

VIG is offered by Vanguard

VIG and SCHD have the same expense ratio of 0.06%.  This makes both of these ETFs low-cost funds.

SCHD

  • Fund Inception: 2011
  • Offered By Charles Schwab
  • Tracks Dow Jones U.S Dividend 100 Index
  • Expense Ratio 0.06%
  • Number Of Stocks: 103
  • Dividend Yield 3.07%

VIG

  • Fund Inception: 2006
  • Offered By Vanguard
  • Tracks The S&P U.S. Dividend Growers Index
  • Expense Ratio 0.06%
  • Number Of Stocks: 267
  • Dividend Yield 1.67%

 

SCHD vs VIG Performance

SCHD and VIG have performed differently over the last 10 years with SCHD outperforming VIG by 1.41% annually.

This is in addition to the higher dividend yield that SCHD offers.

Here is how their performance compares:

SCHD vs VIG Performance Comparison

Here is another comparison of short term performance:

SCHD vs VIG Performance Chart

As you can see, they have performed almost the same over the short term and SCHD has outperformed VIG over the long term.

 

SCHD vs VIG Holdings

There is a significant difference in the number of holdings for SCHD and VIG.  SCHD includes 103 stocks in the ETF while VIG holds 267 stocks.

VIG holds more than twice as many companies compared to SCHD.

These funds also differ in their sector diversification.  SCHD is 19% technology while VIG is 13.90%.

SCHD leaning heavier into the technology sector explains why it has outperformed VIG over the last 10 years.

Technology stocks have performed well over the last decade.

Lastly, with only 103 holdings total, SCHD’s top 10 holdings make up 40% of its assets.  VIG’s top 10 holdings make up 31%.

Here are SCHD and VIG holdings side-by-side:

SCHD vs VIG Holdings

The top 10 holdings for SCHD make up 40% of its portfolio while VIG’s top 10 holdings make up 31%.

This means the performance of a few stocks like Coca-Cola, Merck, Amgen, Verizon, and Pfizer will have a big impact on the overall performance of SCHD.

 

SCHD vs VIG Overlap

There is an overlap between SCHD and VIG that includes 36 stocks.  Only 13.5% of VIG’s holdings are included in SCHD.

Here is SCHD and VIG holdings overlap:

SCHD vs VIG Overlapping Holdings

This means VIG includes a higher majority of the holdings in SCHD and includes many more holdings.

There is an overlap by weight of about 18%:

SCHD and VIG Overlap By Weight

This gives VIG more diversification compared to SCHD.

 

VIG and SCHD Differences

A major difference between VIG and SCHD is that VIG holds more than twice as many stocks.  SCHD holds roughly 103 stocks making it smaller in size compared to most other ETFs.

By investing in an ETF with more holdings you are helping diversify your portfolio and minimize risk.

Differences between VIG and SCHD:

  • Different Number Of Holdings (~267 vs ~103)
  • Level Of Diversification
  • Tracking Index
  • Brokerage (VIG is Vanguard, SCHD is Schwab)

 

SCHD Description

The Schwab U.S. Dividend Equity ETF (SCHD) was launched in October 2011 as a fund that seeks to track the total return of the Dow Jones U.S.  This means that the fund tracks the performance of the Dow Jones U.S. Dividend 100 Index to replicate its total returns.

The SCHD exchange-traded fund is passively managed and designed to give investors broad exposure to the Large Cap Value segment of the US equity market.

It has amassed assets over $34 billion which makes it one of the largest ETFs attempting to match the Large Cap Value portion of the US equity market.

Large-cap companies are more stable than mid and small-cap companies.  This means less risk for investors.

It can also be a more reliable source of cash flow as these companies usually have a market capitalization of $10 billion and above.

 

SCHD Performance

SCHD closely monitors and seeks to replicate the performance of its underlying index which is the Dow Jones U.S. Dividend 100 Index.  The Dow Jones U.S. Dividend 100 Index is one of the top funds in the United States.

The Index measures the performance of high dividend-yielding stocks issued by U.S. companies.

These are stocks that have over the years shown consistency in paying dividends which is their primary advantage over other companies.

SCHD Performance Chart

As you can see, SCHD has performed well since its inception in 2011.

The ETF has a beta of 0.96 and a standard deviation of 22.79% for the trailing three-year period.  This makes SCHD a medium-risk choice in its class.

The fund has roughly 103 holdings.

For investors looking for a fund to give them exposure to the Large Cap Value segment of the market, Schwab U.S. Dividend Equity ETF may be a good option based on selected key benefits.

These include expense ratio, expected asset class return, and momentum.

 

SCHD Costs

One of the many key factors to consider in choosing an ETF, especially for a long-term investment strategy is cost.  To analyze the cost of an ETF, you should look at the expense ratio.

Cheaper funds tend to yield higher profits since they spend less on management.

SCHD is one of the cheapest exchange trade funds with an expense ratio of 0.06%.

In other words, for a $10,000 investment, the ETF charges you $6 for annual operating expenses.

 

SCHD Holdings

The top 10 holdings for SCHD make up 40% of its total assets.

SCHD Top Holdings

Schwab’s SCHD is largely made up of Amgen, Coca-Cola, Merck, and Verizon and provides exposure to over 100 stocks.

With only 103 holdings in the portfolio, SCHD is less diversified compared to other Schwab funds like Schwab Total Stock Market Index Fund (SWTSX).

 

VIG Description

Vanguard Dividend Appreciation ETF (VIG) was launched in 2006 and is one of Vanguard’s ETFs that seeks to track the performance of the S&P U.S. Dividend Growers Index.  VIG contains large-cap equities and emphasizes holdings with a track record of growing their dividends year over year.

Therefore, companies in VIG have a track record of not only paying dividends but increasing dividends over time.

It makes sense that VIG has a higher dividend yield (1.67%) compared to other Vanguard ETFs like VOO.

However, Vanguard’s other high dividend ETF, VYM has a higher dividend yield.

 

VIG Performance

Vanguard Dividend Appreciation ETF (VIG) has performed well over the last 10 years but its performance has lagged compared to the S&P 500 Index.

You can expect VIG’s performance to lag compared to other popular Vanguard ETFs but it makes up for some of that with its higher quarterly dividend payouts.

VIG Performance Chart

Over the last 10 years, VIG has returned an average of 13.52% per year.

 

VIG Holdings

Here are the top 10 holdings for VIG:

VIG Top Holdings

We can see, VIG is largely made up of Microsoft, Johnson & Johnson, UnitedHealth, JP Morgan, and Procter & Gamble but also provides exposure to over 200 other stocks.

VIG has $78.5 billion in total net assets.

 

SCHD vs VIG What’s The Difference?

The main difference between SCHD and VIG is how they select holdings.  VIG looks for companies with dividend appreciation for 10 years while SCHD looks for companies that just pay a dividend.

However, SCHD still has a higher dividend yield and better performance compared to VIG.

Both SCHD and VIG are high dividend yield exchange-traded funds (ETFs).

Another key difference between the two ETFs is that SCHD is offered by Charles Schwab while VIG is offered by Vanguard.

Also, SCHD tracks the Dow Jones U.S. Dividend 100 Index while VIG tracks the S&P U.S. Dividend Growers Index.

VIG has a more diverse set of holdings compared to SCHD.  The top 10 holdings for VIG make up 31% of its portfolio while for SCHD it’s 40%.

This has led to better performance from SCHD but doesn’t guarantee that will continue.

Here is a comparison chart of SCHD vs VIG:

SCHD vs VIG Comparison

SCHD has outperformed VIG over the last 5 years and this is with paying a significantly higher dividend.

However, this doesn’t guarantee SCHD will outperform over the next 5 years.

 

No Minimum Investment

SCHD and VIG are both exchange-traded funds (ETFs) so there is no minimum investment.  Investors looking to buy fractional shares can use platforms like M1 Finance.

Normally, fractional shares are not available for ETFs but with M1 Finance you can purchase fractional shares with no commission.

Buying fractional shares allows you to maximize your investment.

There are two easy ways to invest in VIG or SCHD commission-free.

  1. Vanguard to invest in VIG or Charles Schwab for SCHD
  2. M1 Finance to invest in either VIG or SCHD. (Use this link for $50 when you open a new account)

Both of these options are free.  This is important because fees can lower our returns.

I like M1 Finance as the best option because it gives you the flexibility to purchase VIG, SCHD, and thousands of other stocks.

 

Which Is Better SCHD or VIG?

SCHD and VIG are similar investments.  VIG offers more diversification since it holds about 2 times as many stocks.

This diversification hasn’t made a difference in terms of its performance.  However, you can expect less volatility in general with higher diversified funds.

Some of the higher returns provided by SCHD are due to the higher proportion of technology stocks.

This outperformance of growth stocks might not continue since over the long term value stocks tend to outperform.

VIG offers stable returns with more diversification and with a reputable brokerage.

SCHD offers higher performance and dividend income with more risk and volatility.

If having a larger basket of stocks helps you sleep at night, then VIG would be a better option.

If you are seeking the highest possible returns and can handle the increased volatility then SCHD might be a better option.

Lastly, it’s important to consider costs and fees because they can cost you in the long run.  That’s why it’s so important to purchase and sell your shares commission-free.

You can buy and sell these ETFs commission-free either at Schwab’s or Vanguard’s platform or using  M1 Finance.

 

Is VIG or SCHD Better for Financial Independence?

Both VIG and SCHD have performed well enough to get you to Financial Independence Retire Early (FIRE).  They both have performed great over the last 10 years and have low expense ratios.

Lower fees are a guaranteed way to keep more money in your portfolio!

Being part of the FIRE community, we aim for the lowest fees, highest diversification, and we are big fans of Vanguard.

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For those reasons, I prefer VIG over SCHD.

It’s important to note that both VIG and SCHD might be better held in tax-advantaged accounts like a Roth IRA.

This is because the higher dividend payouts can cause a tax drag on your portfolio while you are in the accumulation phase of financial independence.

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 My winner is VIG based on the increased number of holdings and the fact that I love Vanguard.

That being said, SCHD is a strong option to consider, especially if you have a Schwab account or are purchasing commission-free.

You can also consider pairing these ETFs with other funds to increase diversification such as the FIRE community’s favorite VTSAX.

 


Disclaimer
This post may have affiliate links, which means I may receive commissions if you choose to purchase through links I provide (at no extra cost to you). Thank you for supporting the work I put into this site!

This information is my opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.
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