<div id="readability-page-1"><div><div><h2>Key Points</h2><ul><li>Dividend stocks stagnated over the past few years, but there are signs that they're starting to make a comeback.</li><li>Investors should look for funds that incorporate a quality component so they don't fall victim to dividend cuts or yield traps.</li><li>Among these two dividend ETF heavyweights, one fund does this well, and one does not.</li><li>10 stocks we like better than Schwab U.S. Dividend Equity ETF ›</li></ul>With tech stocks and the S&amp;P 500 generating huge returns over the past few years, there has been limited interest in dividend stocks. But that is starting to change in the early part of 2026 as investors get a little nervous about the health of the economy and the geopolitical backdrop.When investors look to add a high-yield dividend equity exchange-traded fund (ETF) to their portfolio, many turn to the Vanguard High Dividend Yield ETF (NYSEMKT: VYM) and the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD). Both do a good job at delivering steady and predictable income, but they go about building their portfolios in very different ways.In my opinion, one is clearly a better choice than the other.<figure><div><div><img src="https://imageproxy.pbkrs.com/https://s.yimg.com/ny/api/res/1.2/1R4DmztS0vqC4mO8PL1RQA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTYxNA--/https://media.zenfs.com/en/motleyfool.com/8a7cb986c4592e76d10142186bb53643?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="960" height="614" original-src="https://imageproxy.pbkrs.com/https://s.yimg.com/ny/api/res/1.2/1R4DmztS0vqC4mO8PL1RQA--/YXBwaWQ9aGlnaGxhbmRlcjt3PTk2MDtoPTYxNA--/https://media.zenfs.com/en/motleyfool.com/8a7cb986c4592e76d10142186bb53643"/></div></div><figcaption>Image source: Getty Images.</figcaption></figure><h2>High-yield dividend ETFs: Vanguard vs. Schwab</h2>The Vanguard High Dividend Yield ETF tracks the FTSE High Dividend Yield Index. It essentially starts out with a broad U.S. equity universe, ranks the stocks within that universe by indicated dividend yield, and includes the top half of yields in the final portfolio. Given that the fund holds more than 560 stocks, it's not terribly selective and ends up being pretty bland.The Schwab U.S. Dividend Equity ETF follows the Dow Jones U.S. Dividend 100 Index. Its selection involves looking at a number of criteria, including dividend payment history, dividend yield, and fundamentals, such as cash flows, debt, and return on equity. The stocks with the best combination of these criteria make the final portfolio.The Schwab ETF's selection criteria are much more robust and incorporate elements of dividend growth, dividend quality, and high yield throughout its process. Its use of market cap weighting isn't ideal (I'd prefer to see a score-based weighting system used instead), but there's little question that its screening process does a good job of selecting the best of the best dividend stocks.The Vanguard ETF's method of selecting the top half-yielding stocks does end up producing an above-average yield, but there are weaknesses beyond that. There's no consideration of dividend health or sustainability in the process, leaving it vulnerable to including potential dividend cutters or yield traps. Like the Schwab ETF, it uses market cap weighting, which dilutes the fund's full yield potential. Case in point: Its top holding is Broadcom, which somehow qualified for inclusion despite a yield of less than 1%.<h2>The Schwab U.S. Dividend Equity ETF is the clear winner</h2>I'm a fan of funds that use some combination of strategies to act as a cross-check against each other in order to exclude bad actors. The Schwab ETF does that, which in my opinion makes it a better high-yield equity play.Granted, its performance has been miserable over the past few years. But that's a product of the fund's investment style being out of favor. Nothing about the strategy itself has changed. Its long track record of success prior to the past few years shouldn't be discounted.The Schwab U.S. Dividend Equity is the better buy.<h2>Should you buy stock in Schwab U.S. Dividend Equity ETF right now?</h2>Before you buy stock in Schwab U.S. Dividend Equity ETF, consider this:The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $474,578!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,141,628!*Now, it’s worth noting Stock Advisor’s total average return is 955% — a market-crushing outperformance compared to 196% for the S&amp;P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.See the 10 stocks »*Stock Advisor returns as of January 18, 2026. David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard Whitehall Funds-Vanguard High Dividend Yield ETF. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.SCHD vs VYM: What's the Better High-Yield Dividend ETF Buy? was originally published by The Motley Fool</div></div></div>

SCHD

The article compares two popular high-yield dividend ETFs: Schwab U.S. Dividend Equity ETF (SCHD) and Vanguard High Dividend Yield ETF (VYM). It argues that SCHD is the superior choice due to its robust selection criteria that consider dividend quality and growth, unlike VYM, which focuses solely on high yields. Despite SCHD's recent poor performance, its investment strategy remains sound. The article suggests that investors should be cautious and consider other top stock recommendations before investing in SCHD.