Top Dividend Focused ETF’s Compared / SCHD or VYM
- SCHD-Schwab Dividend Equity ETF
- VYM-Vanguard High Dividend Yield ETF
- Company History
- Expense Ratio
- Assets Under Management
- Index Tracked
- Trading Volume
- Final thoughts
Brief History of Schwab and Vanguard
Charles Schwab is in the top 10 largest banking institutions in America, with over 8 trillion in assets for clients. Schwab was founded in the early 1970’s. Vanguard is of course one of the longest running and most respected asset managers in the business. It’s ranked 2nd in largest ETF holdings. Likewise, it was founded in the early 70’s.
Expense Ratio of SCHD and VYM
Both SCHD and VYM have an expense ratio of 0.06%. This is almost nothing in the way of costs. On an investment of $10,000, this is $6 a year. Absolute INSANITY that you can get a quality ETF with these low fees.
The Vanguard ETF has many more holdings-a total of 441 holdings. SCHD only has 100 holdings. Therefore, if you want more diversification, you go with VYM. At the same time, are these going to be your core holdings? If you already own something like VTSAX or ITOT, you probably don’t need more diversification.
ETF’s broken down by Market Cap Weights
SCHD gives you a little bit more Mid-cap exposure but less large and small cap exposure. SCHD also has .03% in micro-cap stocks.
Some Notable VYM Holdings:
VYM: 3.55% is in JP Morgan, 2.35% in Bank of America. That’s already almost 6% in banks within the top 10 holdings. JNJ is 3.3% and Exxon is 2.02%. Home Depot is 2.6%. VYM is around 20% in the Financial Sector (That’s where a lot of the Dividend Yield is coming from).
Here are the Top holdings of SCHD:
4.11% in Home Depot, 4.4% in Pepsi, 4.46% is in Merck,4.16 % in Pfizer. SCHD is weighted more towards Technology and less towards Energy/Minerals than VYM. 8.54% of VYM is in energy.
VYM: P/E= 20.12; P/CF = 12.26
SCHD- P/E= 19.24; P/CF 12.83
At first glance, SCHD seems to have a lower valuation than VYM. However, the P/Cash Flow for VYM is slightly lower than SCHD. It is so close; it’s a game of pick your metric.
Assets Under Management of VYM vs. SCHD
VYM has slightly more assets under management than SCHD; 45 Billion vs. 35 Billion respectively.
VYYM uses the FTSE High Dividend Yield Index, while SCHD uses the Dow Jones U.S. Dividend 100 Index
VYM beats out SCHD with trading volume as well, but not by much. VYM has an average daily trading volume of 264M, SCHD has an average trading volume of 255M
SCHD vs. VYM Performance (Short-term & Long-term)
Year-to-date Performance: SCHD -9.21%; VYM -7.01%; Both of these ETF’s are down on the year. However, VYM has held up a little better.
52 weeks: SCHD -4.54%; VYM -2.70%; Once again, both are in the red with their prices. However, once you add in the dividends, VYM is slightly in the green.
Since 2011 (As far back as data goes for these two):
13.42% CAGR for SCHD and 11.44% for VYM. Here is where SCHD really shines with it’s performance. The chart (SCHD is blue, VYM is red)
You can see immediately from the chart, this race was neck and neck until the 2020 crash; that’s when SCHD really took off. For my own fun, I redid it in portfolio visualizer and stopped it in 2019. The result was only a .6% between the two (SCHD winning again).
At the same time, keep in mind that history doesn’t predict the future. VYM could very well outperform SCHD over the next decade, no one knows. The current macro-economic conditions are certainly not the same as they have been for the last decade.
Max Drawdown-VYM had a slightly less max drawdown of -9.63% vs -10.65% of SCHD. It seems to almost be a pattern with these ETF’s. Often the ones with the higher drawdowns end up outperforming long-term. On a random side note, VTSAX had a max drawdown of -14.5% over that same time period. I’m only mentioning this so you understand that these dividend focused ETF’s presented an opportunity to feel less of a loss and offer reduced volatility in bear markets.
Final Thoughts on SCHD vs. VYM
Either one of these ETF’s is a winner for the passive investor that wants to focus more on Dividends or value than a standard total market fund offers. As minute as it sounds, I do like the lower max drawdown of VYM. Part of my reasoning for holding a dividend focused ETF would be less volatile and more protection. In a fast growing bull market, I’d prefer to be less focused on Dividends (but that is just my own tastes). On the other hand, the long-term performance of SCHD can’t be denied. Long-term, it is neck and neck with even a total market ETF like ITOT, only losing by 1% from 2011 to now.
If you are more apt to take history as a guide and are only looking at total Return, then SCHD seems to be the winner. As always, I’m not a financial advisor and I recommend running these ETF’s through ETF overlap to see where they overlap with your current portfolio. You don’t want to double down on too many stocks if you can help it.