VIG vs SCHD: Comparing Popular Dividend ETFs

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Charles Schwab vs Vanguard logos. Deciding between VIG vs SCHD comes down to dividend growth and price appreciation vs current dividend income and total return.

This article compares VIG vs SCHD — the Vanguard Dividend Appreciation Index Fund vs Schwab’s U.S. Dividend Equity ETF. 

Both are passively managed index ETFs popular with dividend investors and retirees looking to earn dividend growth, price appreciation, and solid dividend yields above total market ETFs such as VTI.

Index ETFs track market indexes like the S&P 500. 

VIG and SCHD are narrower-scoped ETFs that track specific dividend-focused indexes. Each ETF has fewer stock holdings than the S&P 500. 

VIG tracks the S&P U.S. Dividend Growers Index. SCHD tracks the Dow Jones U.S. Dividend 100™ Index.

Both funds own shares of the largest U.S. dividend-paying companies and pay quarterly dividends.

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

Since most actively managed mutual funds do not beat their target benchmarks, prudent 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 VIG vs SCHD, it’s important to keep the following in mind:

  • Both funds are solid, low-cost options for your portfolio. 
  • VIG aims for higher dividend growth (annual appreciation of the dividend payment) and price appreciation. SCHD aims for higher yields.
  • VIG price return has outperformed SCHD over a ten-year investment horizon (see chart below).
  • SCHD has outperformed VIG in total returns (reinvesting dividends). Past performance is not indicative of future returns.
  • VIG is better diversified, while SCHD has more holding concentration risk. VIG has 66% more holdings than SCHD.
  • Both ETFs are available to purchase from any online broker. I prefer M1 Finance.

Retirees and investors seeking current income may prefer SCHD for its higher yield today and higher total returns.

Younger investors or those looking for long-term dividend growth, lower taxable income, and higher price appreciation may choose VIG. 

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.

VIG vs SCHD — Side-by-Side Comparison

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

A few noticeable differences comparing VIG vs SCHD:

  • VIG is larger and older.
  • The benchmark indexes are different.
  • Both expense ratios are very low — identical at the time of writing.
  • SCHD’s average annual total return has outperformed VIG over ten years.
  • VIG has more holdings, while SCHD has a higher concentration percentage on the top 10 holdings.
  • SCHD has a higher yield. VIG excludes certain high-yielding eligible stocks because of its focus on dividend appreciation (see Benchmark Indexes section for more information).

VIG vs SCHD — Benchmark Indexes

VIG tracks the S&P U.S. Dividend Growers 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 growth.
  • U.S.-domiciled security with a $100+ million market cap.
  • REITs are ineligible.
  • The index excludes the top 25% of highest-yielding eligible companies from the index.

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.

VIG vs SCHD Chart — Performance

The performance of these two funds tracks similarly. VIG edges SCHD in price appreciation due to lower dividend payouts. 

Here is a daily updated VIG vs SCHD chart compared against each other over ten years. The chart shows price performance, excluding the total return accounting for reinvested dividends. 

Scroll right on mobile.

Past performance is not indicative of future results. 

Though VIG’s price has outperformed over the past ten years, SCHD has outperformed total returns (if the investor reinvests dividends).

VIG, being a dividend appreciation fund, holds stocks that are likely to increase their dividend yearly and excludes some high-yield stocks.

SCHD has stocks that increase dividends but hold higher-yielding stocks that VIG excludes.

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.

VIG vs SCHD — Dividend Payout Schedules

Both VIG and SCHD pay quarterly dividends. 

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

Learn more:

VIG vs SCHD — Top Ten Holdings

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

VIG Top Ten Holdings

As of 02/08/2024
# Symbol Company Weight
1 MSFT Microsoft Corp. 0.05317
2 AAPL Apple Inc. 0.04447
3 JPM JPMorgan Chase & Co. 0.03256
4 UNH UnitedHealth Group Inc. 0.03224
5 AVGO Broadcom Inc. 0.03144
6 XOM Exxon Mobil Corp. 0.02651
7 V Visa Inc. Class A 0.02632
8 JNJ Johnson & Johnson 0.02498
9 MA Mastercard Inc. Class A 0.02352
10 HD Home Depot Inc. 0.02304
WordPress Table

SCHD Top Ten Holdings

As of 02/23/2024
# Symbol Company Weight
1 AVGO BROADCOM INC 0.05104122
2 MRK MERCK & CO INC 0.047037
3 ABBV ABBVIE INC 0.04696398
4 HD HOME DEPOT INC 0.04393774
5 CVX CHEVRON CORP 0.03974656
6 TXN TEXAS INSTRUMENT INC 0.0397384
7 VZ VERIZON COMMUNICATIONS INC 0.0396952
8 AMGN AMGEN INC 0.03936533
9 KO COCA-COLA 0.03864605
10 CSCO CISCO SYSTEMS INC 0.03719892
WordPress Table

 

Want more holdings? Check out this list of the top 50 VIG holdings and top 50 SCHD holdings

Mutual Fund Alternatives

Here are the closest mutual fund alternatives for both ETFs. It is best to own these mutual funds if you have an existing account with Vanguard. 

  • VIG = VDADX 
  • SCHD ~ SWDSX (not identical, actively managed)

Each mutual fund equivalent has a $2,500 to $3,000 minimum investment threshold and a higher expense ratio (0.08% for VDADX, 0.89% for SWDSX)

The VIG mutual fund equivalent is VDADX, the Vanguard Dividend Appreciation Index Fund Admiral Shares. Investors with an account at Vanguard who prefer mutual funds can consider this fund an equivalent to VIG. 

SCHD has no mutual fund equivalent. The SWDSX is an expensive, actively managed mutual fund and is not recommended due to the high expense ratio and severe underperformance.

Investors who do not have a Vanguard account should use the VIG and SCHD ETFs to get equivalent exposure at lower minimums and expense ratios.

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. You may benefit from using the VDADX index funds if your account is with Vanguard.

Mutual funds are more hands-off and automatically reinvest dividends and capital gains. The less frequent trading also appeases the temptation to be more active with an investment. 

Fidelity Alternatives

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

Here they are:

  • Fidelity High Dividend ETF (FDVV)
  • Fidelity Dividend Growth Fund (FDGFX)
  • Fidelity Strategic Dividend & Income Fund (FSDIX)

The Verdict

Deciding between VIG and SCHD comes down to long-term dividend growth and price appreciation vs current income and total return.

VIG has a lower dividend yield but higher dividend growth. That makes it a slightly better option in non-retirement accounts because the lower yield will result in lower taxable distributions. 

VIG’s price has outperformed SCHD over the past 10 years, but SCHD wins in total return (including dividends reinvested). 

In retirement accounts, SCHD benefits more from avoiding dividend taxation. In contrast, in a taxable account, investors will be on the hook for higher taxation on the dividends.

Retirees looking for current income in retirement accounts should go with SCHD. However, beware of higher concentration risk, as the fund holds a third of holdings as VIG. 

That said, SCHD holds mostly established, blue-chip U.S. companies with lower volatility (beta) than the broader market. 

Younger investors looking for some income but lower taxation in taxable accounts and solid long-term total return may prefer VIG.

VIG should provide more price appreciation because it pays lower dividends and excludes certain high-yield stocks. If investors need less current income but want to benefit from stocks with high dividend growth, VIG is a good choice. 

Purchase either ETF at any commission-free online broker

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

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Disclosure: The author is long SCHD. 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.


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