SCHD, VYM and DGRO are three of the most popular dividend ETFs in the US, and all three are cheap. They take different approaches, though. SCHD focuses on about 100 high-quality dividend payers with higher yields. VYM spreads across hundreds of above-average yielders. DGRO targets companies that keep raising their dividends, even if today’s yield is lower.
Side by side
| SCHD | VYM | DGRO | |
|---|---|---|---|
| Provider | Schwab | Vanguard | iShares (BlackRock) |
| Index | Dow Jones U.S. Dividend 100 | FTSE High Dividend Yield | Morningstar US Dividend Growth |
| Number of stocks | About 100 | About 550 | About 400 |
| Expense ratio | 0.06% | 0.06% | 0.08% |
| Typical yield (recent years) | Highest, about 3.5% to 4% | Middle, about 2.5% to 3% | Lowest, about 2% to 2.5% |
| Main focus | Quality plus yield | Broad high yield | Dividend growth |
| Payouts | Quarterly | Quarterly | Quarterly |
SCHD: quality and income
SCHD requires 10 straight years of dividends, then ranks companies on cash flow to debt, return on equity, yield and dividend growth, keeping the top 100. It has the highest yield of the three and a strong record of raising its payout. The trade-off is concentration: fewer stocks and big sector tilts toward energy, consumer staples and health care. Full breakdown: SCHD explained.
VYM: broad high yield
VYM simply holds US companies with above-average forecast dividend yields, excluding REITs, weighted by size. With roughly 550 stocks it is the most diversified of the three and includes large banks, health care, energy and some tech. Its yield sits between SCHD and DGRO.
DGRO: dividend growth
DGRO requires at least five years of dividend increases and screens out companies paying out too much of their earnings (payout ratios above 75%). That lets it include tech and growth-minded firms with modest yields but fast-growing payouts. The yield is lowest today, but it has historically delivered competitive total returns.
Which one should you choose?
- Want the most income now? SCHD.
- Want the broadest dividend portfolio? VYM.
- Want rising income and more growth, and have a long time horizon? DGRO.
Many investors pick one rather than holding all three, since they share many stocks. A dividend ETF also works well alongside a broad index fund like VTI or VOO. Remember that in a taxable account dividends are taxed every year, so these funds are often best held in a Roth IRA, 401(k), TFSA or ISA.
How much income would $10,000 pay?
Using rough mid-range yields: about $375 a year in SCHD, $275 in VYM and $225 in DGRO. Yields change with prices, so check the current figure before you buy. Learn how payouts work in dividend investing for beginners.
Run your own numbers with our free dividend calculator.
- Live prices and sentiment on every ticker page
- Weekly email with your watchlist movers
- Price alerts on the stocks and coins you follow
Frequently asked questions
What is the best dividend ETF?
There is no single best one. SCHD suits investors who want higher income, VYM those who want wide diversification, and DGRO those who want dividends that grow faster over time.
Is SCHD better than VYM?
SCHD has had a higher yield and stronger dividend growth, while VYM holds far more stocks. Fees are the same at 0.06%.
Do dividend ETFs beat the S&P 500?
Not consistently. They have often lagged in strong tech-led markets and held up better in some downturns. Their main appeal is steady, growing income.
This article is general information, not financial advice.
Leave a Reply