SCHD vs VOO: Comparing Two Popular ETFs

This article compares SCHD vs VOO — Schwab’s U.S. Dividend Equity ETF and Vanguard’s S&P 500 ETF. 

Both are passively managed index ETFs popular with dividend income and passive investors looking to earn solid dividend yields near high-yield savings account yields. 

Index ETFs track market indexes, such as the Dow Jones Industrial Average or the Russell 2000. 

SCHD is a narrower-scoped ETF that tracks a specific dividend-focused index called the  Dow Jones U.S. Dividend 100™ Index. 

VOO is a truer and broader index fund, which tracks the most widely-watched U.S. stock market index: Standard & Poor’s 500.  

Both funds own shares of the largest U.S. dividend-paying companies and pay dividends. But VOO owns non-dividend-paying companies as well, lowering its yield.  

Passive index ETF managers do not pick stocks. They allocate funds to all stocks in the benchmark index to track its performance. Managers receive a small fee to achieve this outcome.

Since most actively managed mutual funds do not beat their target benchmarks, many fiduciary financial planners recommend index funds and ETFs instead of actively managed funds or individual stocks.

Bottom Line Upfront (BLUF)

Before I get into the details of SCHD vs VOO, it’s important to keep the following in mind:

• Both funds are excellent, low-fee options for your portfolio. 
• SCHD prioritizes dividend income and has a higher yield.  VOO also pays a dividend, but its dividend will always be smaller (lower yield). 
• VOO is better diversified, while SCHD has more holdings concentration risk. VOO has about five times as many holdings as SCHD.
• Both ETFs are available to purchase from any online broker. I recommend M1 Finance, which is best for dividend investing and dividend reinvestment. 
• If you have an account with Vanguard or Schwab, you can own similar mutual funds (see the mutual funds section).

Please note that both ETFs update their prospectuses regularly. The information referenced in this article will change over time.

The best resource for both funds is the respective company’s websites.

Here are links to the most updated information at Schwab and Vanguard. Consider the information on those pages to be the authoritative data source.

• Schwab’s U.S. Dividend Equity ETF (SCHD)
• Vanguard’s S&P 500 Index ETF (VOO)

SCHD vs VOO — Side-by-Side Comparison

Here’s a side-by-side comparison of both ETFs. Scroll right on mobile.

A few noticeable differences comparing SCHD vs VOO:

• SCHD has a higher yield, more than 2x that of VOO.
• The benchmark indexes are different.
• VOO is larger, older, and more diversified.
• Both expense ratios are very low — the expense ratio difference is not significant enough to influence the decision to invest.
• SCHD has outperformed VOO over the near term, but VOO has had superior returns over the past five and ten-year periods. 
• VOO has four times as many holdings, and SCHD has a higher concentration percentage on the top 10 holdings. Many stock holdings overlap. 

SCHD vs VOO — Benchmark Indexes

SCHD tracks the Dow Jones U.S. Dividend 100™ Index. 

Visit this page for the latest information about the index.

Stocks must pass the following screens to be eligible for inclusion in the index: 

• Minimum 10 consecutive years of dividend payments
• Minimum float-adjusted market capitalization (FMC) of US$ 500 million
• Minimum three-month ADVT of US$ 2 million

Stocks passing all three screens are ranked in descending order by Indicated Annual Dividend (IAD) yield, defined as a stock’s IAD (not including any special dividends) divided by its price. The top half of securities based on this ranking are eligible for stock selection. Excludes REITs.

VOO tracks the S&P 500 Index, one of the most widely-watched stock indexes worldwide.

Visit this page for the latest information about the index.

The S&P 500 Index is a float-adjusted market cap-weighted index, meaning the largest stocks make up a proportionately high percentage of the index. Lower market cap stocks make up a proportionately lower percentage of the index. 

A selection committee of financial market professionals chooses which stocks go into the index. The focus is primarily on large-cap stocks that are representative of the U.S. economy. 

The committee does not try to “pick stocks” for market outperformance. Instead, they look at company size, stock liquidity, share float, and profitability, and it fits the index’s goal to be an accurate reflection of the broad, large-cap marketplace.

SCHD vs VOO Chart — Performance

Here is a daily updated chart of the performance of a $10,000 investment in both SCHD vs VOO over ten years. Scroll right on mobile.

Note that this chart shows the net asset value (NAV) price performance of each ETF. It does not include dividends, which are subtracted from the NAV when a dividend is paid. 

Past performance is not indicative of future results. 

Though VOO has outperformed SCHD over the past ten years, either fund is suitable as an income-producing asset in your portfolio. 

See the table above for up-to-date three, five, and ten-year average annual performance records.

SCHD vs VOO — Dividend Payout Schedules

Both SCHD and VOO pay quarterly dividends. 

Investors receive quarterly dividend payments in March, June, September, and December.

SCHD vs VOO — Top Ten Holdings

Here are the top ten holdings for each index fund. Visit the links at the beginning of the article for the most updated lists. 

Learn more about the top 50 SCHD holdings. Learn more about VOO’s top 50 holdings.

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Mutual Fund Equivalents

Here are the closest mutual fund equivalents for both ETFs.

• SCHD ~ SWDSX (not identical, actively managed)
• VOO = VFIAX (identical)

Charles Schwab does not have an identical index mutual fund to compare against SCHD. The closest mutual fund is the Schwab Dividend Equity Fund™ (SWDSX).

The SWDSX is an actively managed mutual fund with an expense ratio close to 1%. It has drastically underperformed SCHD, yields less, and costs more. 

SWDSX is not recommended due to the expense ratio.

The VOO mutual fund equivalent is Vanguard’s S&P 500 Index Fund Admiral Shares (VFIAX). Investors with an account at Vanguard who prefer mutual funds can consider this fund a VOO alternative.

The State Street SPDR VOO equivalent is the SPDR S&P 500 ETF Trust (SPY).

Customers of online brokers that charge fees for mutual funds should use the VOO or SCHD ETFs.

Mutual funds trade differently than ETFs, which trade like stocks. 

ETFs are easier to own, and the price changes throughout the day. Mutual funds only trade at the market close. 

Active investors typically use ETFs for trading purposes or to buy and hold indexes when they can’t access index mutual funds.

For example, if you have an investing account with M1 Finance, you’d invest via ETFs instead of mutual funds. If your account is with Vanguard, you may benefit from using the index funds VFIAX because it’s slightly easier to reinvest capital gains and dividends. 

• Learn more about SWDSX here
• Learn more about VFIAX here 

Use the above resources to find the most up-to-date information regarding SWDSX vs VFIAX.

VOO Fidelity Equivalent

If you have a Fidelity account and prefer their funds, there are limited options for similar ETFs or mutual funds.

The VOO Fidelity equivalent is the Fidelity 500 Index Fund (FXAIX).

What is the Best Broker to Buy SCHD or VOO?

Here are my favorite online brokers for investing in ETFs and automatically reinvesting dividends. 

Charles Schwab and Vanguard are excellent choices for long-term retirement investors. You’re in good hands if your IRA or employer-sponsored plan is with either broker.

I recommend another broker for a more modern user experience that can also serve your banking, borrowing, and spending needs. 

Long-term investors may prefer an online broker better for dollar cost averaging and dividend reinvestment. 

I’m a big fan of the online brokerage M1 Finance. M1 Finance is a reliable, robust, no-fee online broker for beginner and intermediate investors. It’s easy to get started.

As your investing skills and portfolio mature, M1 is one of the best platforms to scale.

They also offer an integrated checking account and low borrowing rates. Read my complete M1 Finance review here. 

M1 Finance does not offer mutual funds. However, ETFs are plentiful. It’s my favorite online broker for everyday investing. 

The platform is more intuitive than old-school brokers because it’s built on a modern technology platform.

You create portfolio “pies” that contain all the stocks and ETFs you want to own and in what percentages. Simply add an ETF to a pie and add funds to your account. 

Learn More about M1 Finance

Conclusion

Deciding between SCHD vs VOO comes down to the dividend yield vs. market-equivalent total returns. 

Investors who prefer higher dividend income with near-market returns may prefer SCHD upon completing due diligence. The SCHD dividend is consistently twice that of VOO. 

The SCHD holdings are primarily large-cap blue-chip stocks. VOO and SCHD have a lot of holdings overlap. But VOO contains all U.S. stocks in the S&P 500 index, while SCHD contains only the top-value dividend stocks. 

VOO has outperformed SCHD over the past 10 years. However, SCHD has a greater concentration of risk exposure in the top 10 holdings. At the time of writing, the top ten stocks make up about 40% of SCHD, while VOO’s same metric is 30%.

That means if one heavily weighted stock falls dramatically, the SCHD ETF will fall further than the VOO ETF. 

VOO has nearly five times as many holdings as SCHD. However, because it is a market cap-weighted fund, a large portion is allocated to giant tech companies such as Apple and Microsoft. 

Investors with a slightly higher risk tolerance whose objectives require higher dividend yields should choose SCHD. Own SCHD in a tax-advantaged account to save on dividend taxation. 

Investors with a lower risk tolerance who prefer a more diversified ETF that passively tracks the performance of the S&P 500 should choose VOO. 

Purchase either ETF at any commission-free online broker. 

Please reply with your questions regarding SCHD vs VOO in the comments section below. Include any requests you have about adding more detail to this article. 

Read more:

• SCHD vs JEPI
• SCHD vs VYM
• VOO vs VTI
• FXAIX vs VOO
• IVV vs VOO
• VOO vs SPY

Disclosure: The author is long SCHD, APPL, and MSFT. I’ve chosen the SCHD fund for myself, but please evaluate both funds in the context of your personal investment objectives before choosing which is right for you. The opinions expressed are solely those of the authors and do not reflect the views of M1. They are for informational purposes only and are not a recommendation of an investment strategy or to buy or sell any security in any account. They are also not research reports and are not intended to serve as the basis for any investment decision. Prior to making any investment decision, you are encouraged to consult your personal investment, legal, and tax advisors.