Dividend ETFs: VIG vs SCHD Comparison Guide

Dividend ETFs like VIG and SCHD are outperforming the S&P 500 amid market turbulence.

Investors looking for dividend ETFs often gravitate toward Vanguard's VIG and Schwab's SCHD. While these two exchange-traded funds offer similar benefits, there are some key differences that investors need to understand before deciding which one to buy.  

Dividend ETFs: The Basics on VIG vs SCHD  

VIG and SCHD are both popular exchange-traded funds that focus on dividend-paying stocks. However, there are some subtle but important differences for investors to keep in mind. For example, VIG tracks an index that focuses on stocks of companies that have a history of growing dividends, while SCHD tracks an index that focuses on high dividend yields. 

What Is VIG? 

The Vanguard Dividend Appreciation ETF (VIG) is an ETF offered by Vanguard Group. VIG seeks to track the performance of the S&P U.S. Dividend Growers Index, which is composed of U.S. stocks that have a history of increasing their dividends consistently over time. 

The S&P U.S. Dividend Growers Index includes companies that have increased their dividends for at least 10 consecutive years. These companies are typically characterized by their financial stability, strong cash flows, and commitment to returning value to shareholders through regular dividend increases. 

What Is SCHD? 

The Schwab U.S. Dividend Equity ETF (SCHD) is an ETF offered by Charles Schwab. SCHD seeks to track the performance of the Dow Jones U.S. Dividend 100 Index, which is composed of U.S. stocks that have a track record of consistently paying dividends. 

The Dow Jones U.S. Dividend 100 Index includes 100 high quality U.S. stocks selected based on factors such as dividend yield, dividend growth and dividend sustainability. The index's methodology aims to capture companies with strong dividend-paying characteristics and stable cash flows. 

VIG vs SCHD Comparison: Performance & Yield

Total returns (price) and fund data as of August 7, 2024. 

TIP: For investors seeking dividend yields, see our topics page for high dividend yield ETFs and our article on the best dividend ETFs for 2024.

VIG vs SCHD: Key Takeaways  

For a quick overview of the Vanguard's VIG versus Schwab's SCHD, here are the key takeaways:

• AUM: VIG’s $78 billion AUM is far larger than SCHD’s $56 billion measure. However, both are large enough to ensure significant liquidity and economies of scale that many ETF investors are seeking. 
• Expense ratio: VIG and SCHD have the same low expense ratio of just 0.06, or $6 for every $10,000 invested.
• Yield: SCHD’s 30-day SEC yield of 3.70% beats that of VIG’s 1.70% yield. This difference is by design, as SCHD focuses on high-yielding dividend stocks, while VIG focuses on companies that are increasing their dividends. 
• Performance: VIG outperforms SCHD in the short term. Long-term returns for both funds are similar.

VIG vs SCHD: Performance Comparison 

VIG handily beats SCHD for 1-year performance. This is not a surprise, as stocks with a history of increasing dividends tend to be stable performers, which was a bonus for most of 2023. SCHD may return to short-term outperformance when interest rates fall, and bond investors seek higher-yielding alternatives.  Returns for VIG and SCHD are similar in the long term.

VIG vs SCHD: The Differences  

VIG and SCHD are both popular ETFs that focus on dividend-paying stocks. While they have similar objectives, these dividend ETFs have a few key differences, such as yield, performance, composition and sector exposure. 

The main differences between VIG and SCHD include:

• Provider: VIG is offered by Vanguard, while SCHD is offered by Charles Schwab. The choice of provider may be a factor for investors who have a preference for a particular fund company or are already using their services.
• Index and methodology: VIG tracks the S&P U.S. Dividend Growers Index, which consists of U.S. stocks with a history of increasing dividends for at least 10 consecutive years. SCHD tracks the Dow Jones U.S. Dividend 100 Index, which includes 100 U.S. stocks that exhibit consistent dividend payments. The specific index methodologies may result in differences in the composition and selection of stocks within the ETFs. 
• Dividend growth versus dividend yield: VIG is more oriented toward companies with a track record of dividend growth, while SCHD may include stocks with higher current dividend yields. Thus, SCHD offers higher yields than VIG. 
• Performance: Since VIG focuses more on steady and consistent dividend-paying companies, it tends to produce more stable returns than SCHD, especially in a down market. However, SCHD’s higher risk profile can lead to higher returns over VIG in the long term. 
• Holdings and sector exposure: The holdings and sector exposure of VIG and SCHD may differ due to variations in their underlying indexes and selection criteria. For example, the top sectors for VIG are technology and financial services with top holdings like Microsoft Corp (MSFT) and JPMorgan Chase and Co. (JPM), whereas the top sectors for SCHD are healthcare and industrials with top holdings like Merck & Co Inc. (MRK) and The Home Depot Inc (HD). 

VIG vs SCHD: The Similarities  

VIG and SCHD are both popular dividend ETFs that share similarities, such as low expenses, diversification and focus on dividend quality. 

The main similarities between VIG and SCHD include:

• Low expense ratios: VIG and SCHD both have the same low expense ratio of just 0.06%. This is much lower compared to actively managed funds. These low expenses help to minimize costs for investors and improve potential returns.
• Diversification: Both ETFs offer diversification by investing in a portfolio of dividend-paying stocks from various sectors. This diversification helps to spread risk and reduce concentration in any particular industry or company.
• Dividend focus: Both VIG and SCHD are exchange-traded funds that focus on dividend-paying stocks. They aim to provide investors with exposure to companies that distribute regular dividends. 
• Dividend quality: VIG and SCHD both prioritize the selection of high-quality dividend-paying stocks. While their specific methodologies may differ, such as SCHD’s focus on higher yields, they generally seek companies with a history of consistent dividend payments and financial stability. 

Is VIG or SCHD Better?

VIG is a suitable investment for investors who are looking for exposure to U.S. equities with a focus on dividend growth. SCHD can be attractive to investors who prioritize generating income from their investments with above-average yields. 

Conservative investors may prefer VIG because it tends to have more stable returns in negative market environments compared to SCHD. However, income seekers who don’t mind taking on added short-term risk in exchange for higher yields and potential for higher returns in the long term may prefer SCHD. 

VIG vs SCHD: ETF Comparison Tool  

Investors can use our ETF comparison tool and look at side-by-side data on any two ETFs in the entire investment universe. Simply enter ticker symbols, click the “Compare” button and you can compare current data, such as AUM, expenses, performance, holdings and more. For an example, here are the results from the tool’s VIG versus SCHD comparison. 

Bottom Line on Investing in VIG or SCHD

VIG and SCHD are both dividend ETFs; however, there are some differences that may make one more suitable for an investor compared to the other. For example, VIT focuses on dividend growth while SCHD focuses on high dividend yields. Therefore, investors considering adding VIG or SCHD to a portfolio should assess their investment goals and risk tolerance, as well as the basics of dividend growth investing, before investing.