Schwab’s SCHD vs. Vanguard’s VYM

The Vanguard High Dividend Yield ETF (NYSEMKT:VYM) and Schwab U.S. Dividend Equity ETF (NYSEMKT:SCHD) charge the same low expense ratio, but VYM has outperformed on recent returns, while SCHD sports a higher dividend yield and a distinct sector focus.

Both funds aim to provide diversified access to U.S. companies with above-average dividends, but they go about it differently. This comparison looks at their cost, yield, performance, risk, portfolio construction, and other key details to help clarify which may appeal more depending on investment priorities.

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.

Both ETFs are equally affordable on fees, but SCHD stands out for its higher dividend payout, while VYM has delivered a stronger total return over the past year.

SCHD tracks a focused basket of 101 U.S. dividend payers, with a tilt toward energy (19%), consumer defensive (18%), and healthcare (18%) sectors. Its largest positions, as of the latest data, are Lockheed Martin Corp. (NYSE:LMT) 4.90%, Texas Instrument Inc. (NASDAQ:TXN) 4.51%, and Chevron Corp. (NYSE:CVX) 4.25%. The fund has a 14.3-year track record and no notable structural quirks.

VYM takes a broader approach, holding 589 stocks and leaning more heavily into financial services (21%) and technology (18%), alongside healthcare (13%). Its top holdings include Broadcom Inc. (NASDAQ:AVGO) 7.58%, JPMorgan Chase & Co. (NYSE:JPM) 4.15%, and Exxon Mobil Corp. (NYSE:XOM) 2.41%. Both funds avoid leverage, currency hedges, or other overlays.

For more guidance on ETF investing, check out the full guide at this link.

Both the Schwab U.S. Dividend Equity ETF (SCHD) and Vanguard High Dividend Yield ETF (VYM) are top-tier, low-cost exchange-traded funds designed to deliver passive income through dividend payouts. As a result, choosing between the pair comes down to a handful of differences.

SCHD offers a far greater dividend yield compared to VYM, but the latter delivered better returns recently because of its holdings in the technology sector. Tech stocks, such as Broadcom, saw spectacular gains over the last few years because of the rapidly-expanding artificial intelligence market.

VYM also boasts more diversified holdings than SCHD, which can help to reduce the impact of a downturn in any given set of stocks or sector.

However, the tech industry is volatile, and given SCHD’s higher yield, it could deliver superior returns compared to VYM over the long run. As a result, SCHD is good for investors who are looking for a robust dividend yield to provide passive income over the long term.

VYM can appeal to investors who want broad diversification and greater exposure to the hot field of AI in exchange for a lower dividend yield.

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JPMorgan Chase is an advertising partner of Motley Fool Money. Robert Izquierdo has positions in Broadcom, JPMorgan Chase, and Texas Instruments. The Motley Fool has positions in and recommends Chevron, JPMorgan Chase, Texas Instruments, and Vanguard Whitehall Funds – Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom and Lockheed Martin. The Motley Fool has a disclosure policy.

Better Dividend ETF: Schwab’s SCHD vs. Vanguard’s VYM was originally published by The Motley Fool