Last updated: July 2026

This article is for informational purposes only and is not investment advice. See our full Disclaimer for details.

SCHD and VYM are two of the most widely held dividend ETFs on the market, and they’re compared against each other constantly — for good reason. Both are low-cost, both focus on U.S. dividend-paying companies, and both are frequently recommended as a “core” dividend holding. But they get there in very different ways, and the differences show up clearly once you look past the yield number.

This guide breaks down exactly how SCHD and VYM differ — in methodology, sector exposure, concentration, and historical performance — so you can see which approach actually fits what you’re trying to build.

The Quick Answer

SCHD applies a quality screen to about 100 stocks, selecting companies based on dividend consistency, financial strength, and dividend growth — not just current yield. VYM takes a broader approach, simply including several hundred of the higher-yielding half of the U.S. dividend-paying market, with far less concentration in any one company.

The practical result: SCHD tends to run a higher current yield with more concentrated sector exposure, while VYM offers a lower yield with meaningfully broader diversification. Neither approach is objectively “better” — they’re solving for different things.

SCHD and VYM Side by Side

Metric	SCHD	VYM
Full name	Schwab U.S. Dividend Equity ETF	Vanguard High Dividend Yield ETF
Index tracked	Dow Jones U.S. Dividend 100 Index	FTSE High Dividend Yield Index
Approach	Quality + dividend growth screen	Broad high-yield inclusion
Number of holdings	~100	400–600+
Expense ratio	0.06%	0.04%
Approx. dividend yield	~3.2%–3.8%	~2.3%–2.6%
Approx. AUM	$70B+	$70B+
10-year annualized return*	~12.3%	~11.5%
Issuer	Charles Schwab	Vanguard

Historical 10-year performance figure from third-party ETF analytics data; not a projection of future returns. Figures are approximate and change regularly — always confirm current numbers on Schwab’s and Vanguard’s official fund pages before investing.

How Each Fund Selects Its Holdings

This is where SCHD and VYM genuinely diverge, and it’s the reason the rest of their differences exist.

SCHD starts by requiring at least 10 consecutive years of dividend payments, then ranks the surviving companies using a composite of quality metrics: cash-flow-to-debt ratio, return on equity, dividend yield, and 5-year dividend growth rate. Only the top-ranked companies by that composite score make it into the fund. It’s a selective process — SCHD isn’t trying to hold “the market,” it’s trying to hold what it considers the highest-quality dividend payers.

VYM works differently. It ranks U.S. dividend-paying companies by forecasted dividend yield and includes roughly the top half of that ranking — several hundred companies rather than around 100. There’s no quality overlay filtering out financially weaker companies the way SCHD’s methodology does; the primary criterion is yield rank, applied broadly across the market.

Neither approach is “wrong.” SCHD is making an active bet that its quality criteria identify better dividend payers. VYM is making a more passive bet that broad diversification across the higher-yielding half of the market is preferable to a smaller, hand-screened list.

Sector Concentration: The Biggest Practical Difference

Because SCHD screens for a specific combination of yield and quality, it ends up meaningfully concentrated in a handful of sectors — historically weighted heavily toward energy, consumer staples, and healthcare, which together can make up more than half the fund. VYM’s broader inclusion criteria generally results in a more even sector spread across financials, healthcare, consumer staples, and industrials, among others.

This matters more than it might seem. A dividend fund concentrated in a few sectors will behave more like those sectors during a downturn or rally — for example, becoming more sensitive to energy prices if energy makes up a large slice of the fund. VYM’s broader spread reduces that kind of single-sector sensitivity, at the cost of a lower overall yield.

Approximate Sector Breakdown

Sector	SCHD (approx.)	VYM (approx.)
Energy	~20%	Lower, more evenly spread
Consumer Staples	~18%	Moderate weighting
Healthcare	~16%	Meaningful weighting
Financials	Lower weighting	Meaningful weighting
Industrials	Lower weighting	Moderate weighting
Technology	Minimal	Moderate weighting

Sector weightings shift over time as each fund rebalances against its underlying index. These figures are illustrative of each fund’s general tilt, not a live snapshot — check the issuer’s official fund page for current sector allocation before investing.

The takeaway from this table isn’t the exact percentages, which change with every rebalance — it’s the shape of the difference. SCHD’s quality-and-yield screen happens to pull it toward energy, consumer staples, and healthcare companies more often than not, while VYM’s broader inclusion criteria spreads exposure more evenly across financials, healthcare, industrials, and other sectors without any one category dominating in the same way.

If you already hold other funds with heavy sector tilts — for example, an energy-sector ETF, or a growth fund heavily weighted toward financials — it’s worth checking how a SCHD or VYM allocation would layer on top of that exposure, rather than assuming either dividend fund is automatically well-diversified relative to the rest of your portfolio.

Top Holdings Comparison

SCHD’s top holdings have historically included large, established dividend payers such as Merck, Cisco Systems, and Amgen — companies that score well on SCHD’s quality and yield criteria. VYM’s top holdings tend to include a broader mix of the market’s largest dividend payers, such as Broadcom, JPMorgan Chase, Exxon Mobil, Johnson & Johnson, and Cisco Systems.

You’ll notice some overlap — both funds hold Cisco, for instance — but the overall composition is different enough that the two funds are not simply “the same holdings with a different label.” VYM’s inclusion of a company like Broadcom near the top of its list also illustrates how VYM’s yield-rank methodology can end up holding companies that wouldn’t necessarily pass SCHD’s stricter quality screen.

Performance and Volatility

Over the trailing 10-year period, SCHD has posted a modestly higher annualized return than VYM according to third-party ETF analytics platforms — a gap generally attributed to SCHD’s quality-and-growth screen and its sector tilts performing well over that specific stretch. That comparison can look different over shorter windows: 1-year and 5-year performance rankings between SCHD and VYM have flipped depending on the exact period measured and which sectors were in or out of favor at the time, so treat any single short-term comparison with caution.

Volatility has also differed: SCHD’s more concentrated, sector-tilted portfolio has generally shown higher volatility than VYM’s broader diversification. During sharp market downturns, the two funds have sometimes behaved quite differently depending on which sectors were driving the sell-off — SCHD’s heavier tilt toward specific sectors can amplify moves in either direction relative to VYM’s broader base.

One data point worth flagging directly: SCHD and VYM have a historical correlation of around 0.75 — meaningfully lower than the near-1.0 correlation you’d see comparing, say, VOO and VTI. That means combining both funds in a portfolio can provide real diversification benefit, unlike pairing two nearly identical index funds.

Fees: A Minor but Real Difference

VYM’s 0.04% expense ratio is slightly lower than SCHD’s 0.06%. On a $10,000 investment, that’s a difference of about $2 per year — not a meaningful factor on its own, but worth noting since it’s one of the few areas where VYM has a clear, uncomplicated edge over SCHD.

Rebalancing Frequency and Turnover

SCHD’s underlying index rebalances annually, with quarterly reviews to drop companies that no longer meet the eligibility criteria (such as cutting their dividend). That relatively low turnover keeps trading costs inside the fund modest and contributes to its tax efficiency.

VYM also rebalances on a set schedule, and because it tracks a broader, less selective universe, the makeup of “the top half of dividend-yielding companies” shifts somewhat as stock prices and yields move throughout the year. In practice, both funds are considered relatively low-turnover, tax-efficient index-based ETFs compared to actively managed alternatives — neither generates the frequent buying and selling that tends to create unexpected capital gains distributions.

Tax Treatment

Both SCHD and VYM primarily distribute qualified dividends, meaning most of their income is generally taxed at the lower long-term capital gains rates (0%, 15%, or 20%, depending on your income bracket) rather than at ordinary income tax rates. This puts both funds on similar tax footing, unlike an actively managed, options-based fund such as JEPI, which typically generates a meaningfully larger share of non-qualified income.

Because both funds are structured as ETFs rather than traditional mutual funds, they also benefit from the in-kind creation and redemption process that tends to minimize unexpected capital gains distributions — a structural advantage ETFs generally have over mutual funds, regardless of which of these two you choose. This is general tax information, not personalized advice; your own tax outcome depends on your income, account type, and holding period, so a tax professional can confirm the specifics for your situation.

Can You Hold Both?

Unlike VOO and VTI, where near-perfect correlation makes holding both largely redundant, SCHD and VYM’s lower correlation (around 0.75) means pairing them is a legitimate diversification strategy rather than needless duplication. Some investors specifically combine SCHD’s higher-yield, quality-focused approach with VYM’s broader market exposure to get a blend of both characteristics in a single dividend allocation, rather than picking one exclusively.

Which One Fits Your Situation?

SCHD may be a better fit if:

• You want a higher current yield from a smaller, quality-screened portfolio
• You’re comfortable with more concentrated sector exposure in exchange for that higher yield
• You value SCHD’s dividend growth track record alongside its current income

VYM may be a better fit if:

• Broad diversification across hundreds of dividend-paying companies matters more to you than maximizing current yield
• You want the lowest possible expense ratio among core dividend funds
• You prefer a passive, less concentrated approach to sector exposure

For a deeper look at how these two compare against a third major approach — dividend growth investing — see our related article on [dividend growth ETFs], and if you’re weighing high current income specifically, our [JEPI vs SCHD] comparison covers a very different risk-and-income trade-off.

Frequently Asked Questions

Is SCHD or VYM better for retirees? Both are commonly used for retirement income, and the choice often comes down to whether current yield (SCHD) or broader diversification and lower cost (VYM) matters more to your specific situation. Some retirees hold both. This is general information, not a personal recommendation — a financial advisor can help evaluate what fits your retirement income plan.

Why does SCHD have a higher yield than VYM if they’re both “high dividend” funds? SCHD’s smaller, more concentrated portfolio and its specific quality-and-yield screening criteria tend to produce a higher yield than VYM’s broader, less concentrated approach, which spreads exposure across many more companies including some with more moderate yields.

Do SCHD and VYM hold any of the same stocks? Yes, there is overlap — both funds have held companies like Cisco Systems, for example — but the two funds’ overall composition and sector weighting differ enough that they are not interchangeable.

Which fund has performed better recently? This depends heavily on the exact time window measured. Different data providers have shown different funds leading over 1-year and 5-year periods, while SCHD has shown a modest edge over VYM specifically over a 10-year measurement window in some analyses. Always check current, dated performance data rather than relying on a single historical snapshot.

Is it better to own SCHD and VYM together, or just pick one? Because their historical correlation is meaningfully below 1.0, holding both can provide real diversification benefit rather than simple duplication — unlike some ETF pairs that track nearly identical exposure. Whether that’s the right approach for you depends on your broader portfolio and goals.

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This article reflects publicly available fund data as of the “last updated” date above and is provided for informational purposes only — it is not a recommendation to buy or sell any security. Yields, expense ratios, holdings, sector weightings, and performance figures change over time; always verify current data directly on Schwab’s and Vanguard’s official fund pages before making an investment decision. Read our full Disclaimer and Privacy Policy for more information.