Two popular dividend ETFs are SCHD, the Schwab U.S. Dividend Equity ETF, and VIG, the Vanguard Dividend Appreciation ETF, but they differ more than you may realize. Let's compare them.
First, note that I don't chase dividends. But I recognize that many investors use dividends to supplement their current income, particularly in retirement. Others just irrationally prefer dividend-paying stocks. I even designed a dividend-focused portfolio for income investors. In any case, SCHD and VIG are very popular and take a pretty different approach. Here we'll review these dividend ETFs and explore the differences between them.
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In a hurry? Here are the highlights:
- SCHD and VIG are two popular dividend-oriented ETFs from Schwab and Vanguard, respectively.
- SCHD launched in 2011 and VIG launched in 2006.
- VIG is not the closest Vanguard equivalent of SCHD; that is VYM.
- Both are very affordable. SCHD costs 0.06% and VIG costs 0.04%.
- Both are very popular and have significant AUM, but VIG is more popular than SCHD.
- SCHD looks for high-quality companies with a sustainable dividend via profitability screens.
- VIG is comprised of dividend growth stocks, companies with a historically increasing dividend over the past 10 years.
- Both funds exclude REITs.
- SCHD and VIG only have about 17% overlap by weight.
- Since SCHD's inception in 2011, it has slightly lagged VIG in performance.
- These two funds have delivered nearly the same risk-adjusted return.
- As we'd probably expect, SCHD delivers slightly greater exposure to equity risk factors like Value, Profitability, and Investment.
- Dividend investing on the whole is largely rooted in the Value, Profitability, and Investment factors, with somewhat naive exposure to them.
- I created a dividend-focused portfolio that incorporates both of these funds that can be found here.
Contents
Video
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SCHD vs. VIG – Quick Comparison Table
Before we get into the details, here's a quick comparison table of SCHD vs. VIG:
| SCHD | VIG | |
|---|---|---|
| Name | Schwab U.S. Dividend Equity ETF | Vanguard Dividend Appreciation ETF |
| Issuer | Schwab | Vanguard |
| Inception | 2011 | 2006 |
| Index | Dow Jones U.S. Dividend 100 Index | S&P U.S. Dividend Growers Index |
| Expense Ratio | 0.06% | 0.04% |
| AUM | $85 billion | $103 billion |
| Holdings | 100 | 338 |
| Dividend Yield | 3.4% | 1.6% |
| 5-yr Dividend Growth | ~9% CAGR | ~8% CAGR |
| Portfolio Turnover | 30% | 11% |
| P/E Ratio | 17 | 26 |
| Beta | 0.82 | 0.87 |
| Qualified Dividends | ~100% | ~100% |
SCHD vs. VIG – Methodology
Let's talk about the selection methodologies of SCHD and VIG, because they are more different than you probably realize.
How SCHD Selects Stocks
SCHD is the Schwab U.S. Dividend Equity ETF. It tracks the Dow Jones U.S. Dividend 100 Index. This index is comprised of 100 stocks with at least 10 consecutive years of dividend payments and a minimum market cap of $500 million. Stocks are then selected for the index by screening for yield, profitability and cash flow metrics, and projected dividend growth. This fund excludes REITs. Individual companies are capped at 4% and sectors at 25%.
The starting universe is roughly 2,500 U.S. companies, and the index whittles it down through a multi-step process that tries to identify quality, not just yield.
To qualify, a stock must have paid dividends for at least 10 consecutive years, with a non-negative 5-year dividend growth rate and a payout ratio below 60%. REITs, MLPs, and preferred stocks are excluded entirely.
From the remaining pool, the index ranks companies using four equally-weighted quality metrics: free cash flow to total debt ratio, return on equity (ROE), indicated annual dividend yield, and 5-year dividend growth rate. The top 100 by composite score make the cut. Individual holdings are capped at 4.5% and the portfolio is reconstituted annually each March, with quarterly rebalancing.
The annual reconstitution means SCHD can look materially different from one year to the next. The March 2026 reconstitution, for example, rotated roughly 8 percentage points out of energy and added UnitedHealth, Qualcomm, and Accenture, a significant shift in portfolio character.
The result is a concentrated, quality-screened, value-tilted portfolio of roughly 100 stocks with a meaningful current yield. The cash flow and ROE screens do real work here; they're designed to catch companies that can sustain their dividends, not just companies that happen to be paying them today.
How VIG Selects Stocks
VIG, the Vanguard Dividend Appreciation ETF, is comprised of dividend growth stocks – companies with a history of an increasing dividend over time. VIG tracks the S&P U.S. Dividend Growers Index. This index was created in 2006, and is comprised of companies with at least 10 consecutive years of an increasing dividend payment. The index is reconstituted annually. Like SCHD, VIG caps individual holdings at 4%.
Rather than optimizing for current yield, VIG selects companies with at least 10 consecutive years of increasing dividends and weights them by market cap.
The critical differentiator is that VIG deliberately excludes the top 25% highest-yielding stocks (with a 15% yield threshold for existing constituents). This is an explicit anti-yield-trap screen. The reasoning is simple: stocks with unusually high yields are often in trouble. VIG doesn't want them.
The result is a much broader portfolio of roughly 340 stocks dominated by high-quality growth companies: Apple, Microsoft, Broadcom, JPMorgan Chase, Eli Lilly. These companies grow their dividends over time, but the starting yield is low because the market already prices in their growth prospects.
VIG reconstitutes annually.
The Key Difference
If you didn't pick up on it already, SCHD and VIG differ pretty substantially in how they're picking stocks.
SCHD asks: Which companies pay the best, most sustainable dividends right now?
VIG asks: Which companies have the longest track record of growing their dividends over time?
Those sound similar, but they produce portfolios that are ~83% different by weight. One screen captures value-oriented, cash-generative businesses. The other captures quality growth businesses that happen to have dividend streaks. Same dividend theme, very different underlying portfolio.
Thanks to its earnings screens, SCHD has a bit more loading on the Value, Profitability, and Investment factors. VIG actually has slight negative loading on Value. This illustrates the pretty different exposures of the funds and explains most of their performance divergence.
SCHD's top 10 reads like a list of steady blue-chip payers: energy majors, consumer staples, telecom, and pharma. VIG's top 10 includes Apple, Microsoft, and Broadcom, none of which you'd typically think of as “dividend stocks.” Yet all three have 10+ year records of dividend increases, which is all VIG requires. Tech represents roughly 1/3 of VIG's portfolio. In SCHD, it's a fraction of that.
Holdings appearing in both funds include Merck, Coca-Cola, PepsiCo, Texas Instruments, and a handful of others, but even shared names often carry very different weights. The confirmed overlap is only about 17% by weight, which is low enough that holding both funds is not unreasonable.
SCHD vs. VIG – Sector Composition
| SCHD | VIG | |
| Basic Materials | 2.8% | 4.8% |
| Consumer Staples | 14.7% | 13.9% |
| Consumer Discretionary | 7.5% | 8.7% |
| Financials | 19.6% | 14.5% |
| Healthcare | 13.1% | 15.8% |
| Industrials | 15.8% | 12.9% |
| Energy | 5.9% | 0.1% |
| Technology | 14.9% | 23.4% |
| Telecommmunications | 5.4% | 2.0% |
| Utilities | 0.4% | 3.2% |
| Real Estate | 0.0% | 0.0% |
Notice how SCHD has roughly zero exposure to Utilities and VIG has roughly zero exposure to Telecom and Energy. Both funds exclude REITs. Specifically, SCHD and VIG only have about 17% overlap by weight.
SCHD vs. VIG – Performance
Here's a performance backtest of SCHD and VIG two funds going back to SCHD's inception in 2011 and looking through February 2026:
They have basically been neck and neck, trading off outperformance every few years.
VIG has slightly outperformed SCHD over the total period, but notice how this was basically due to VIG pulling away in 2025 after recovering faster from the dip early in the year. Prior to that, SCHD was ahead most of the time. These 2 funds delivered a nearly identical risk-adjusted return, and VIG exhibited lower volatility and a smaller max drawdown, which was the March 2020 crash.
Here's how the two funds have stacked up year by year since SCHD's inception in late 2011. I've added VYM and VOO for context:
| Year | SCHD | VIG | VYM | VOO |
|---|---|---|---|---|
| 2012 | 11.4% | 11.7% | 12.7% | 16.0% |
| 2013 | 32.9% | 28.9% | 30.1% | 32.4% |
| 2014 | 11.7% | 10.1% | 13.5% | 13.6% |
| 2015 | -0.3% | -2.0% | 0.3% | 1.3% |
| 2016 | 16.4% | 12.0% | 17.1% | 12.2% |
| 2017 | 20.8% | 22.2% | 16.4% | 21.8% |
| 2018 | -5.6% | -2.1% | -5.9% | -4.5% |
| 2019 | 27.3% | 29.6% | 24.1% | 31.4% |
| 2020 | 15.1% | 15.4% | 1.1% | 18.3% |
| 2021 | 29.9% | 23.8% | 26.2% | 28.8% |
| 2022 | -3.2% | -9.8% | -0.5% | -18.2% |
| 2023 | 4.6% | 14.5% | 6.6% | 26.3% |
| 2024 | 11.7% | 17.0% | 17.6% | 25.0% |
| 2025 | 4.3% | 14.2% | 15.4% | 17.8% |
Over the full period, both SCHD and VIG have delivered annualized total returns of about 12.5%. Interestingly, two funds with very different yield profiles, sector exposures, and factor characteristics arrived at nearly the same destination after 15 years.
But the year-by-year picture tells a more interesting story. SCHD and VIG take turns leading based on value-growth factor rotation.
SCHD's best years tend to be value-favorable environments: 2013, 2016, 2021, and the dramatic 2022 bear market. In 2022, while VOO fell 18.2% and VIG dropped 9.8%, SCHD lost only 3.2%. That's from SCHD's lower beta (0.82), its value tilt, and the absence of the growth stocks that got obliterated that year.
VIG's best years are growth-favorable environments: 2017, 2019, 2023, 2024, 2025. When tech does well, that works in VIG's favor since it's about 1/3 of the fund. VIG outperformed SCHD by roughly 10 percentage points in each of 2023, 2024, and 2025 as markets rewarded AI-adjacent names.
The practical implication is neither fund is “better” in absolute terms. They're likely best thought of as cyclical complements. Investors who pick one and stick with it will spend certain years feeling happy and other years feeling regretful. That's factor rotation doing its thing on two dividend funds that aren't even marketed or discussed as factor funds.
VIG's slightly lower volatility and smaller max drawdown have made it the “smoother” ride, but SCHD's 2022 performance is the outlier that stands out for many dividend investors doing the risk math.
SCHD vs. VIG – AUM and Fees
Both SCHD and VIG are popular and highly liquid. They have AUM's of $86 billion and $103 billion respectively.
SCHD has an expense ratio of 0.06%. VIG is a little cheaper at 0.04%.
SCHD vs. VIG – Dividend Yield and Taxes
Of importance to yield chasers is the fact that SCHD also has a considerably higher dividend yield than VIG. In April 2026, SCHD has a dividend yield of 3.4% and VIG has a dividend yield of 1.6%.
SCHD generates more annual dividend tax drag due to its higher yield. As such, VIG is the more tax-efficient choice in a taxable account.
Both funds pay nearly 100% qualified dividends, meaning the IRS taxes them at the lower long-term capital gains rates (0%, 15%, or 20% depending on your bracket) rather than as ordinary income.
Neither fund has made a meaningful capital gains distribution since inception. SCHD's record here is perfect since 2011, and VIG is essentially the same. Both are about as tax-clean as equity funds get on the distribution dimension.
The meaningful difference is dividend volume. SCHD's ~3.4% yield generates roughly double the taxable dividend income per dollar invested compared to VIG's ~1.6%. If you hold these in a taxable account, you're paying taxes on those dividends every year whether you want to or not. Morningstar estimates VIG's annual tax cost ratio at roughly 0.45% vs. SCHD's 0.90%. Over decades of compounding, that gap matters.
Is VIG the Vanguard Equivalent of SCHD?
This question comes up constantly. No, VIG is not the Vanguard equivalent of SCHD, though we've implicitly treated it as such in this comparison thus far. I'll explain.
SCHD and VIG happen to share the “dividend” label and a 10-year dividend track record requirement, but they're built on quite different philosophies.
Remember, SCHD selects for higher-yielding, quality-screened stocks, and VIG excludes the highest-yielding stocks entirely. They're solving different problems.
If you want the closest Vanguard equivalent to SCHD, that title would more suitably belong to VYM, the Vanguard High Dividend Yield ETF. VYM tracks the FTSE High Dividend Yield Index, capturing the higher-yielding half of the U.S. equity market. It has a ~2.3% yield (between VIG and SCHD), holds roughly 570 stocks, and charges 0.04%. Its long-run correlation with SCHD (~0.95) is much tighter than VIG's (~0.89).
For a detailed comparison of SCHD and VYM specifically, see this post here.
The “Vanguard equivalent” framing also has many novices assume you can only buy VIG at Vanguard and SCHD at Schwab. That's incorrect. Both are listed on major exchanges and are available pretty much anywhere. You can buy SCHD at Vanguard and VIG at Schwab.
SCHD vs. VIG vs. VYM
Since many readers are comparing all three, here's a quick 3-way breakdown of SCHD, VIG, and VYM :
| SCHD | VIG | VYM | |
|---|---|---|---|
| Strategy | Quality + Yield | Dividend Growth | Broad High Yield |
| Holdings | 100 | 338 | 570 |
| Dividend Yield | 3.4% | 1.6% | 2.3% |
| Quality Screens | Yes (ROE, cash flow) | Implicit | None |
| Beta | 0.82 | 0.87 | 0.73 |
| Expense Ratio | 0.06% | 0.04% | 0.04% |
SCHD basically sits in the middle of VIG and VYM – higher yield than VIG, more quality screening than VYM, more concentrated than both. It's the one that dividend investors with strong opinions seem to own and never stop talking about. (See: any Reddit or Twitter thread about retirement income.)
For a detailed comparison of SCHD and VYM specifically, see this post here.
SCHD vs. VIG – Conclusion
If you're primarily trying to use dividends to generate current income, SCHD's combination of high yield, quality screens, and decade-plus dividend growth track record is hard to beat in its category. Its 2022 performance (-3.2% when VOO fell 18%) is potentially reassuring for anyone who can't stomach deep drawdowns. Parking it in a Roth IRA lets it compound tax-free where its high yield can do no harm.
If you're in the accumulation phase and don't need the income now, VIG's lower yield, lower turnover, and tech-tilted growth orientation make it the more tax-efficient choice for a taxable account, and its factor profile is cleaner for total-return investors. Just don't be surprised when it lags badly in value-dominant markets.
If you're unsure which camp you're in, holding both isn't a terrible idea due to the aforementioned difference in methodologies and lack of overlap. You'd be diversifying across two different dividend philosophies.
I created a dividend-focused portfolio that incorporates both of these funds that can be found here.
But remember what I noted in my comparison of VIG and VYM: Vanguard themselves investigated the strategies of funds like these and concluded that their constituent stocks’ performance was fully explained by their exposure to known equity factors like Value, Profitability, etc., so if you don't care about using dividends as income, you may be better off – in terms of total return – by simply investing in products that specifically target those factors, like a small cap value fund.
Dividend investors often have the instinct to choose one of these dividend funds over a diversified total market fund purely for the dividend income. Don't fall prey to that pervasive mental accounting fallacy.
Keep in mind too that in choosing one of these funds, you may be missing out on some sectors entirely, like REITs for example, which are usually coveted by yield chasers.
Conveniently, both SCHD and VIG should be available at any major broker, including M1 Finance, which is the one I'm usually suggesting around here.
Do you hold either of these ETFs in your portfolio? Let me know in the comments.
Frequently Asked Questions
Which is better, SCHD or VIG?
Neither SCHD nor VIG is objectively better. They serve different goals. SCHD is better for high current income; VIG is better for total return with lower tax drag. Over their shared history since 2011, both have delivered nearly identical annualized returns of around 12.5%. Choose based on your goals, strategy preference, yield needs, tax situation, and risk profile, or just buy both.
Can you hold SCHD and VIG together?
Yes, you can hold SCHD and VIG together, and that's probably not an unreasonable idea. With only about 17% overlap by weight, they're more complementary than redundant. A combined portfolio covers both value-oriented dividend payers (SCHD) and quality growth dividend growers (VIG).
Can you buy SCHD at Vanguard?
Yes. SCHD is an exchange-traded fund listed on NYSE Arca and is available for purchase at any major brokerage, including Vanguard.
What is the Vanguard equivalent of SCHD?
There isn't a perfect match, but VYM, the Vanguard High Dividend Yield ETF is probably the closest Vanguard equivalent to SCHD. Both target higher-yielding stocks, but VYM lacks SCHD's quality screens for ROE and cash flow. VIG is frequently suggested but uses a different strategy (dividend growth, not high yield).
Is SCHD or VIG better for a taxable account?
VIG has the advantage in taxable accounts due to its lower dividend yield (~1.6% vs. SCHD's ~3.4%), which means less taxable income each year. VIG's lower 11% turnover also reduces capital gains risk. SCHD is better suited for a tax-advantaged account like a Roth IRA.
Do SCHD and VIG hold REITs?
Neither fund holds REITs. Both explicitly exclude them from their indexes.
Has SCHD ever cut its dividend?
No. SCHD has increased its dividend every year since inception in 2011, delivering roughly 10% annualized dividend growth. Individual quarterly payments can fluctuate, but annual totals have trended consistently upward.
Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a research report. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. Hypothetical examples used, such as historical backtests, do not reflect any specific investments, are for illustrative purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.
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