SCHD vs VYM: Quality vs Diversification
Both SCHD and VYM are popular dividend ETFs from respected providers—Schwab and Vanguard. Both have ultra-low expense ratios (0.06%). Both pay quarterly dividends. But beneath these similarities lie two completely different philosophies.
SCHD bets on quality. VYM bets on diversification. Here's how to choose between them.
Quick Comparison at a Glance
SCHD: The Quality Filter
SCHD (Schwab U.S. Dividend Equity ETF) applies a rigorous quality screen. It only considers companies with at least 10 consecutive years of dividend payments, then ranks them by fundamental strength—cash flow, return on equity, debt levels.
The result? About 100 holdings concentrated in proven dividend growers like Broadcom, Home Depot, Cisco, and Coca-Cola. SCHD isn't chasing the highest yields—it's selecting the companies most likely to grow those yields over time.
VYM: The Diversification Play
VYM (Vanguard High Dividend Yield ETF) takes a different approach. It tracks the FTSE High Dividend Yield Index, holding 400+ stocks that simply pay above-average dividends.
You get broader diversification across sectors and more mid-cap exposure. The trade-off? Less emphasis on quality means some holdings may struggle to grow dividends consistently.
The Real Decision: Quality vs Coverage
This isn't about better or worse—it's about what matches your investment philosophy.
Choose SCHD if:
- You prioritize dividend growth over current yield
- You believe quality beats diversification
- You want exposure to proven dividend champions
- You're comfortable with ~100 holdings
Choose VYM if:
- You want maximum diversification (400+ stocks)
- You prefer broader market exposure
- You want lower concentration risk
- You value Vanguard's index approach
The 10-Year Math
Let's assume you invest $100,000 today and reinvest all dividends. Here's a realistic projection based on historical patterns:
*Assumes 11% dividend growth for SCHD, 6% for VYM, with 7% capital appreciation for both. Your results will vary.
The Bottom Line
If I had to choose one, I'd pick SCHD. The quality filter has historically delivered superior dividend growth and total returns. That said, VYM isn't a bad choice—it offers broader diversification and lower concentration risk.
Many investors hold both: SCHD for quality dividend growth, VYM for broader market coverage. The 60/40 split (60% SCHD, 40% VYM) is popular for balancing growth and diversification.
Run Your Own Numbers
See exactly how much dividend income you could generate with SCHD, VYM, or any combination of both.