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SCHD vs VYM: Which High Dividend ETF Is Best?

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We Compare SCHD vs VYM:

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

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

SCHD vs VYM Graphic

 

SCHD vs VYM

The primary difference between SCHD and VYM is the company that offers the exchange-traded fund (ETF).  SCHD is offered by Charles Schwab while VYM is offered by Vanguard.  Another significant difference is the number of stocks in each, with VYM having 413 different companies in the index compared to 103 with SCHD.

SCHD is offered by Charles Schwab

VYM is offered by Vanguard

VYM 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%

VYM

  • Fund Inception: 2006
  • Offered By Vanguard
  • Tracks The FTSE High Dividend Yield Index
  • Expense Ratio 0.06%
  • Number Of Stocks: 413
  • Dividend Yield 2.66%

 

SCHD vs VYM Performance

SCHD and VYM have performed differently over the last 10 years with SCHD outperforming VYM by 2.09% annually.

Here is how their performance compares:

SCHD vs VYM Performance Comparison

Here is another comparison of short term performance:

SCHD vs VYM Performance Chart

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

 

SCHD vs VYM Holdings

There is a significant difference in the number of holdings for SCHD and VYM.  SCHD includes 103 stocks in the ETF while VYM holds 413 stocks.

VYM holds 4 times more companies compared to SCHD.

These funds also differ in their sector diversification.  SCHD is 19% technology while VYM is 7%.

SCHD leaning heavier into the technology sector explains why it has outperformed VYM 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.  VYM’s top 10 holdings make up 24%.

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

SCHD vs VYM Holdings

The top 10 holdings for SCHD make up 40% of its portfolio while VYM’s top 10 holdings make up 24%.

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 VYM Overlap

There is an overlap between SCHD and VYM that includes 89 stocks.  Almost all of the holdings in SCHD are included in VYM.  However, only 21.7% of VYM’s holdings are included in SCHD.

Here is SCHD and VYM holdings overlap:

SCHD vs VYM Overlap

This means VYM includes the majority of the holdings in SCHD and includes many more holdings.

There is overlap by weight of about 29%:

SCHD vs VYM Overlap Graph

This gives VYM more diversification compared to SCHD.

 

VYM and SCHD Differences

VYM vs SCHD differs in that VYM holds 4 times 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 VYM and SCHD:

  • Different Number Of Holdings (~413 vs ~103)
  • Level Of Diversification
  • Tracking Index
  • Brokerage (VYM 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).

 

VYM Description

Vanguard’s High Dividend Yield ETF (VYM) was launched in 2006 and is one of Vanguard’s ETFs that seeks to track the performance of the FTSE High Dividend Yield Index.  The FTSE High Dividend Yield Index originated from the FTSE Global Equity Index Series (GEIS) in the United States.

The FTSE index is made up of selected US-based stocks based on above-average dividend yields.

It measures the returns of common stocks of high dividend-yielding companies and serves as a benchmark for the performance of these stocks.

VYM is a large-cap weighted index, providing broad exposure to the large-cap value stocks in the Equity market.

The fund excludes Real Estate Investment Trusts (REITs) from its holdings.

 

VYM Performance

Vanguard High Dividend Yield ETF (VYM) is popular for its steady performance returns along with consistently high dividend yield.

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

VYM Performance Chart

Over the last 10 years, VYM has returned an average of 12.46% per year.

 

VYM Holdings

Here are the top 10 holdings for VYM:

VYM Top 10 Holdings

We can see, VYM is largely made up of JP Morgan, Johnson & Johnson, Home Depot, Procter & Gamble, and Pfizer but also provides exposure to over 400 other stocks.

VYM has $43 billion in total net assets.

 

SCHD vs VYM What’s The Difference?

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

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

Also, SCHD tracks the Dow Jones U.S. Dividend 100 Index while VYM tracks the FTSE High Dividend Yield Index.

VYM also has a more diverse set of holdings compared to SCHD.  The top 10 holdings for VYM make up 24% 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 VYM:

SCHD vs VYM Comparison Chart

Since the FTSE index seeks to forecast dividend yields, it excludes stocks that are forecasted to have no dividend yield or have no record of dividend payment in the past 12 months.

In this way, it makes no room for large-cap growth stocks which do not pay dividends.

It is solely exposed to large-cap value stocks.

 

No Minimum Investment

SCHD and VYM 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 VYM or SCHD commission-free.

  1. Vanguard to invest in VYM or Charles Schwab for SCHD
  2. M1 Finance to invest in either VYM 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 VYM, SCHD, and thousands of other stocks.

I also use Personal Capital to track my investment fees. They have a free Retirement Fee Analyzer that tells you the future impact of fees on your portfolio.

Personal Capital Retirement Fee Analyzer

Personal Capital’s free tools allow you to easily find which of your investments has high fees so that you can switch them to low-cost options.  (Get a $20 Amazon Gift Card with this link when you add at least one investment account containing a balance of more than $1,000 within 30 days)

 

Which Is Better SCHD or VYM?

SCHD and VYM are similar investments.  VYM offers more diversification since it holds about 4 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.

VYM 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 VYM 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.

Again a great way to do this is with M1 Finance.

You can purchase fractional shares for free and they give you the ability to buy VYM, SCHD, and thousands of other stocks/ETFs.

 

Is VYM or SCHD Better for Financial Independence?

Both VYM 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.

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

For those reasons, I prefer VYM over SCHD.

It’s important to note that both VYM 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.

Related Posts:

 

My Winner: VYM

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

Vanguard’s VYM offers:

  • Diversification
  • Low Fees
  • Vanguard ETF

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

I would also suggest considering other Vanguard funds 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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