Dividend investing has a reputation for being unglamorous. However, the strategy is a steady way to build long-term wealth.
Investors can either identify individual dividend stocks or own exchange-traded funds which offer diversification.
Two popular dividend ETFs in the U.S. are the Schwab U.S. Dividend Equity ETF (SCHD) and the Vanguard High Dividend Yield ETF (VYM).
Over the last decade, the two funds have quietly delivered very different results for investors.
And one of them has pulled noticeably ahead.
“In addition to providing a stream of income to investors, dividend-paying stocks may help
to buffer market volatility and are an important part of total return,” Invesco’s strategy insights on dividend investing explained.
That idea is exactly what the numbers show for SCHD and VYM.
Why dividend investing is a top strategy
Dividend ETFs are ideal for investors who want stability while generating a passive income stream.
As the best ETFs own dividend stocks across multiple sectors, the overall risk profile of your portfolio reduces significantly.
SCHD and VYM are two of the biggest names in the dividend ETF space.
SCHD tracks the Dow Jones U.S. Dividend 100 Index. It screens for companies with at least 10 consecutive years of dividend payments, then ranks the companies on cash-flow-to-debt, return on equity, dividend yield, and five-year dividend growth.
Related: Early SCHD ETF investors now earn a 12.5% dividend yield on cost
Only the highest-quality names are added to the index with a maximum portfolio weight of around 4.6%.
VYM takes a broader approach.
It tracks the FTSE High Dividend Yield Index, which ranks around hundreds of companies by forecasted dividend yield. After the ranking is complete, the bottom half of the stocks are excluded from the ETF.
Holdings are weighted by market cap rather than dividend quality, and real estate investment trusts are excluded.
The result is a wider, more conservative basket tilted toward large, stable businesses in sectors such as financials, energy, and industrials.
SCHD total returns beat VYM over the decade
According to data from YCharts:
- SCHD delivered a total return of 243.6% over the last decade, after adjusting for dividend reinvestments.
- Comparatively, the VYM has returned 206% since September 2016.
- Even on share price appreciation, SCHD has returned 145.8%, higher than VYM’s 127.5%.
Both funds tracked closely together for stretches, especially through 2020 and 2021. But SCHD began pulling away more consistently starting around 2022, according to the chart data, and the gap has held since.
Schwab’s own fund materials, as of June 30, 2026, show SCHD posting a 10-year annualized return of 12.37% on a net asset value basis, alongside a three-year standard deviation of 13.32% and a Sharpe ratio of 0.65.
Recent performance has also been strong. VYM posted a year-to-date return of 14.90% based on market price as of Sept. 11, 2026, according to Vanguard’s fund overview page.
SCHD posted a year-to-date NAV return of 17.46% through June 30, 2026, according to Schwab.
Dividend ratios SCHD and VYM investors should track
Before choosing between the two funds, it helps to compare the numbers that explain the performance gap.
- SCHD expense ratio: 0.06%, well below the Morningstar category average of 0.27%
- VYM expense ratio: 0.04%, versus an ETF Database category average of 0.55% and a FactSet segment average of 0.37%
- SCHD distribution yield: 3.24%
- SCHD return on equity: 27.76%
- SCHD price-to-earnings ratio: 19.57
- SCHD dividend history screen: requires at least 10 consecutive years of dividend payments
- VYM holdings count: Roughly 607 stocks, far more diversified than SCHD’s 102
Both funds charge rock-bottom fees compared with their category averages. The low fees matters over time, since a higher expense ratio could easily eat into total returns over time.
Schwab U.S. Dividend Equity vs. Vanguard High Dividend Yield: how they differ
The performance gap traces back to how each fund picks its stocks. SCHD’s quality screen weeds out companies that pay a big dividend but may not be sustainable.
That has steered the fund toward sectors like consumer staples and healthcare, at 20.4% and 20.7% of the portfolio, respectively, while keeping technology exposure light.
More Dividend Stocks:
- Does IBM pay dividends? History, yield & payout ratio explained
- Does Walmart pay dividends? Its yield and payouts explained
- Does Sandisk pay dividends? Will it split its stock?
VYM’s simpler yield ranking casts a wider net. Its top 15 holdings include Broadcom, JPMorgan Chase, ExxonMobil, and Johnson & Johnson, spreading exposure across banking, energy, healthcare, and industrials.
Neither approach is wrong.
VYM offers broader diversification and a slightly lower expense ratio, which can appeal to long-term, buy-and-hold investors who want simplicity.
SCHD’s stricter quality bar has simply produced stronger total returns over the stretch shown in the data, a gap most investors chasing yield alone would never think to check.
For readers building a dividend-focused portfolio, the lesson is not that one fund is universally better.
It is that yield and total return are not the same thing, and that the fund with the higher sticker yield is not always the one that grows an account the most.
Related: Schwab SCHD draws $679M as dividend ETF climbs 2.39%
