Modern investors now have access to different securities for long and short-term investments. Some of them are securities like stocks and ETFs that pay dividends. Today, two highly sought-after ETFs are SCHD vs. VYM.
SCHD and VYM are quite popular because they are low-cost and very flexible. SCHD was created by Charles Schwab managers and is called the Schwab US Dividend Equity. VYM was created by Vanguard and is similar to SCHD.
VYM was one of the first Exchange-Traded Fund (ETF) to be created, and SCHD came afterward. Charles Schwab created this ETF to challenge VYM’s leadership position as a low-cost ETF for investors.
They are both low-cost and have identical expense ratios, and they also offer investors long-term value.
Since both ETFs seem to be doing quite well, you may have a hard time deciding which of them to go for, especially if you have little experience in investing. So to help you out, we will do a comparative analysis of both ETFs.
In the end, we hope you will be in the best position to decide which SCHD vs. VYM is suitable for you.
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SCHD: Schwab US Dividend Equity ETF
SCHD or Schwab US Dividend Equity ETF is an ETF created by Charles Schwab fund managers. The asset tracks the total returns of stocks in the US Dow Jones Market Index. Managers of SCHD invest in stocks in this index by first measuring their performance based on their high dividend yields.
The stocks it tracks are for high valued companies with a record of paying investors a dividend. They also evaluate stocks based on their financial ratios and how well they do relative to the competition in their selected industries.
So SCHD seeks to invest about 90% of its net assets on the stocks that meet these requirements in the index. This ETF is also widely circulated and traded across several online platforms. Its wide circulation names it even more valuable.
Let’s review the top 10 holdings of SCHD:
|Verizon Communications Inc.||4.25%|
|Merck & Co. Inc.||4.21%|
|International Business Machines Co.||3.96%|
|Cisco Systems Inc.||3.76%|
|Home Depot Inc.||3.44%|
VYM: Vanguard High Dividend Yield ETF
Vanguard is the largest investment management firm in the US, and they have different ETFs and mutual funds to their credit. One of their most successful ETF creations to date is VYM or Vanguard High Dividend Yield ETF. This fund tracks the benchmark index of stocks in the FTSE High Dividend Yield Index.
The companies in this index have a history of high dividend payouts due to their high yields. So managers of VYM replicate the performance of the FTSE Index by investing a substantial volume of its assets in these stocks.
VYM tracks the performance of the index by measuring the average return of all common stocks of listed companies. By approaching investment using the indexing method, it can follow the performance of stocks that are doing quite well. The end goal is to ensure that it adds these high-yielding stocks to its portfolio.
Managers give each stock an equal proportion similar to the Index.
If you prefer to invest in ETFs that hold stocks and pay dividends regularly because you want to earn income besides the accumulated value of your asset, SCHD and VYM are for you. They are very popular ETFs and are widely circulated.
Let’s review VYM’s top 10 holdings:
|JPMorgan Chase & Co.||3.53%|
|Johnson & Johnson||3.28%|
|Home Depot Inc.||2.59%|
|Procter & Gamble Co.||2.48%|
|Bank of America Corp.||2.35%|
|Exxon Mobil Corp.||2.02%|
|Comcast Corp. Class A||1.96%|
|Verizon Communications Inc.||1.75%|
|Cisco Systems Inc.||1.69%|
SCHD Vs. VYM: Key Differences
SCHD and VYM are similar in nature and structure since they are both ETFs. However, they have a minute difference that some experts will not even classify as such.
For starters, they are issued by different firms. SCHD is a creation of Schwab portfolio managers, and it was launched in 2011. Vanguard issued VYM, and it was launched in 2006. While they both have the same expense fee of 0.06%, VYM has a slightly higher circulation rate.
But it’s in the area of their investment approach that they couldn’t be more different.
SCHD seeks out high-value companies with a history of consistent dividend payout and higher profitability balance sheets. VYM, on the other hand, seeks out higher than average stock yields with the exclusion of Real Estate Investment Trusts (REITs).
For VYM, stick quality doesn’t matter much. What matters is that the stocks pay out more than the current average dividend ratio of the index. This probably explains why SCHD has delivered more returns than VYM despite having the same volatility.
Investors who seek out dividend assets look out for profitability, value, and several investment factors.
Besides these differences, both ETFs are largely the same in other aspects.
SCHD Vs. VYM: Composition Differences
What are the compositional differences between SCHD vs. VYM? This table gives us a clearer idea.
|Segment||US High Dividend Yield||US High Dividend Yield|
|Net Assets||$31.28 billion||$55.1 billion|
SCHD vs. VYM: Performance Differences
How have SCHD and VYM performed over the years? Let’s take a look.
SCHD Performance & Returns
VYM Performance & Returns
SCHD Vs. VYM: Fees
SCHD and VYM have relatively low expense fees of 0.06%, respectively. This makes them highly valued assets that will cost you very little over a long-term period.
SCHD Vs. VYM: Frequently Asked Questions
Here are some questions that can help you better understand SCHD and VYM.
Is SCHD Or VYM Better?
In terms of the quality of stocks, SCHD has higher quality stocks that pay out dividends consistently. VYM, on the other hand, comprises higher than average yield stocks. So if you are looking for an ETF that tracks stocks that pay the highest dividend per share, SCHD is the better option.
Is SCHD A Good Investment?
It is a good investment for many reasons. First, it has a very low expense ratio. Second, it tracks high-cap stocks that hold current and long-term value. So with this ETF, you will have income via dividends incurred while your investment continues to appreciate over time.
Is VYM A Good Investment?
VYM is an excellent choice for investors. The stocks it tracks are valuable. The expense ratio is also very low.
SCHD Vs. VYM: A Comparison OF Two ETFs
Both SCHD and VYM are very attractive for investors who wish to earn higher income in terms of dividends. So which of these do you want?
It depends on you because you control your finances and where you want to be down the line. Both these investment options can help you maximize your income so that your dreams can become a reality.
Despite the risks of investments, this way of earning money is an important aspect of your finances.
Knowing this and understanding the pros and cons of these asset classes, you already set one step toward financial independence. Always remember that risk is a part of life. You just need to learn how to mitigate and reduce risk to reap the rewards you know you deserve in your life.
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Marjolein is a financial consultant who has built over €4,000 monthly passive income and saves over 70% of her income. Read Radicals’ inspiring story, from stuck in the 9-to-5 to loving life. Feel free to send Radical a message at the bottom of this page