<div id="readability-page-1"><div><div><p>Dividend investing remains popular, especially among investors who value steady income.</p><p>Broadly speaking, dividend ETFs fall into two camps. Some focus on high current yields, while others emphasize consistent dividend growth over time.</p><p>The two largest funds in the space reflect those approaches.</p><p>The <strong>Vanguard Dividend Appreciation ETF (VIG)</strong>, with $99 billion in assets, focuses on dividend growers. The <strong>Schwab U.S. Dividend Equity ETF (SCHD)</strong>, with $84 billion, leans more toward higher-yielding stocks.</p></div><h2>Different Ways To Screen For Dividends</h2><div><p>VIG, which charges a 0.04% expense ratio, tracks the S&amp;P U.S. Dividend Growers Index.</p><p>To be included, companies must have increased dividends for at least 10 consecutive years. The index also excludes the highest-yielding 25% of eligible stocks, a screen designed to avoid companies with potentially unsustainable payouts.</p><p>The portfolio is then float-adjusted market cap weighted, with individual holdings capped at 4%.</p><p>Meanwhile, SCHD, which charges 0.06%, tracks the Dow Jones U.S. Dividend 100 Index. The index leans toward higher yields, but still incorporates measures of quality and sustainability.</p><p>Companies must have at least 10 consecutive years of dividend payments (not necessarily growth). From there, stocks are screened and ranked based on factors such as free cash flow relative to debt, return on equity, dividend yield and five-year dividend growth.</p><p>The top 100 stocks by this composite score are included and weighted on a float-adjusted market cap basis, with individual holdings capped at 4% and sector weights capped at 25%.</p></div><h2>Yield Versus Growth</h2><p>The differences between the two funds show up clearly in the yields. VIG currently has a 30-day SEC yield of about 1.6%, compared with roughly 3.4% for SCHD.</p><div><p>SCHD distributes more income upfront, while VIG is more about letting that income grow over time.</p><p>Despite those differences, long-term performance has been fairly similar. Over the past five years, VIG has outperformed, returning 62.4% versus 51.4% for SCHD.</p><p>Over 10 years, the two funds are nearly identical, with returns of 224% for VIG and 221% for SCHD.</p><p>Since SCHD’s inception in October 2011, it holds a slight edge, returning 478% compared with 449% for VIG.</p><p>Both funds, however, have lagged the broader market over these periods, as measured by the <strong>Vanguard Total Stock Market ETF (VTI)</strong>. </p></div><h2>Big Differences Under The Hood</h2><div><p>While performance has been similar, SCHD and VIG have very different portfolios.</p><p>For SCHD, energy has a 20% weighting, compared with less than 4% for the broader market. Consumer staples make up roughly 19%, and health care about 16%.</p><p>Technology, by contrast, represents just 8% of SCHD, while communication services is around 4%.</p><p>That’s a significant divergence from the broader market, where technology dominates with roughly 32% and communication services makes up about 10%.</p><p>VIG also looks very different. It has only about 3.4% in energy, slightly less than the broader market. Health care is overweight at around 17%, and consumer staples comes in at about 11%, also above market levels.</p><p>Technology remains a large part of the portfolio at about 25%, though still notably underweight relative to the broader market.</p></div><h2>Choosing Between Them</h2><p>The choice between the two funds largely comes down to what you want out of them.</p><p>Those seeking higher current income may gravitate toward SCHD. Investors who don’t need that income may prefer VIG, given its lower yield and greater ability to defer taxable income.</p><div><p>But both funds come with trade-offs. Their sector tilts can lead to periods of underperformance (and outperformance) relative to the broader market, and from a tax standpoint, both are generally less efficient than something like VTI, which has lower distributions.</p><p>These funds can serve a purpose, but the trade-offs aren’t always obvious upfront.</p></div></div></div>

SCHD

COST

<p>The Vanguard Dividend Appreciation ETF (VIG) and Schwab U.S. Dividend Equity ETF (SCHD) represent two distinct approaches to dividend investing. VIG, with a focus on dividend growth, has a lower yield of 1.6% and charges a 0.04% expense ratio, while SCHD targets higher yields at 3.4% with a 0.06% expense ratio. Over five years, VIG outperformed SCHD, returning 62.4% compared to 51.4%. Both funds have different sector weightings, with SCHD heavily invested in energy and consumer staples, while VIG has a larger allocation in technology and healthcare. Investors should choose based on their income needs and tax considerations.</p>

VIG vs. SCHD: Dividend Growth vs. High Yield