Income Today or Dividend Growth? How Schwab’s and Vanguard’s Dividend ETFs Compare

SCHD and VIG are two of the most popular dividend ETFs in the US, but they are built for different kinds of dividend investor. SCHD, the Schwab U.S. Dividend Equity ETF, focuses on about 100 companies with solid finances and higher dividend yields. VIG, the Vanguard Dividend Appreciation ETF, focuses on companies with long records of raising their dividends every year, and deliberately leaves out the highest yielders.

The result is two funds that look quite different under the surface. SCHD pays a much higher yield and leans towards energy, consumer staples and healthcare, while VIG pays a lower yield and holds far more technology, making it behave more like a quality growth fund with a dividend discipline.

This guide explains how each fund picks its stocks, what they own, how their yields, dividend growth and costs compare, how they have performed, how they are taxed, and how investors decide between them or hold both.

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FRC’s ETF Investing for Beginners course explains how index ETFs work, followed by ETF Investing Strategies, which covers income and dividend growth approaches, and Advanced ETF Investing.

FRC’s programs and memberships are open to everyone. If ETFs are new to you, FRC’s guide to everything you need to know about ETFs covers their history and how they work.

SCHD vs VIG at a Glance

The two funds share some features, including a 10-year dividend requirement, a 4% cap on any single holding and quarterly payouts. Where they differ is in what they reward, and that shapes everything else.

A Brief History of Both Funds

VIG launched in April 2006, more than five years before SCHD. It was designed from the start around dividend growth, holding companies with long records of raising their payouts rather than those paying the highest income.

For most of its life, VIG tracked an index of so-called dividend achievers. In 2021 Vanguard moved it to the S&P U.S. Dividend Growers Index, which kept the 10-year growth rule but added the screen that removes the highest-yielding companies.

SCHD launched in October 2011 and grew into one of the most widely held income funds in the country. It carried out a 3-for-1 share split in October 2024. In early 2026 Vanguard cut VIG’s expense ratio to 0.04%, slightly below SCHD’s 0.06%.

How SCHD Picks Its Stocks

SCHD starts with US companies that have paid dividends for at least 10 consecutive years, excluding real estate investment trusts. The dividends do not have to have risen each year, only to have been paid.

Eligible companies are then scored on four measures: cash flow to total debt, return on equity, dividend yield and five-year dividend growth rate. The 100 companies with the strongest combined scores make it into the index.

The index is reconstituted once a year in March, with caps of 4% per stock and 25% per sector. Because dividend yield is one of the scoring factors, SCHD naturally tilts towards higher-yielding companies. FRC’s guide to SCHD for passive income explains the methodology in more depth.

How VIG Picks Its Stocks

VIG starts with US companies that have increased their dividends for at least 10 consecutive years. A single year without an increase is enough for a company to drop out at the next review.

From that group, the index removes the highest-yielding 25% of companies. The reasoning is that very high yields can be a warning sign, sometimes reflecting a falling share price or a payout the company may struggle to sustain.

The remaining companies are weighted by market capitalization, with a 4% cap on any one holding. This produces a portfolio of steady dividend raisers, weighted towards large, high-quality businesses, many of them in technology, healthcare and financials.

What SCHD Owns

With about 100 holdings, SCHD is a concentrated fund. Its top 10 holdings typically make up around 40% of the fund, with each holding close to 4% after the annual rebalance.

In early 2026, SCHD’s largest sectors were energy at around 20%, consumer staples at around 19% and healthcare at around 16%. Technology was only around 8%, well below its share of the broad market.

Its top holdings in late 2026 included companies such as Procter & Gamble, Texas Instruments, Coca-Cola, Chevron, UnitedHealth Group, ConocoPhillips, Home Depot, Qualcomm, Amgen and PepsiCo. These are mature businesses known for strong cash flows and dependable dividends.

What VIG Owns

VIG holds more than 300 companies, giving it broader diversification than SCHD. Its largest holdings typically include technology giants with long records of dividend increases, such as Broadcom, Microsoft and Apple, alongside financial companies such as JPMorgan Chase and Visa.

In early 2026, technology was VIG’s largest sector at around 25%, followed by healthcare at around 17% and consumer staples at around 11%. Energy was only around 3%, almost the opposite of SCHD’s mix.

Because it is weighted by market capitalization, VIG’s largest companies carry the most weight, up to the 4% cap. That gives it a portfolio that looks closer to the large-company market than SCHD’s does.

Why Their Sector Mix Is So Different

The difference in sector mix comes straight from the rules. SCHD rewards higher yields, which pulls it towards energy producers, consumer staples and other mature businesses that pay out a large share of their profits.

VIG rewards consistent dividend increases and excludes the highest yielders. Many technology companies pay modest dividends but raise them steadily, so they fit VIG’s rules well while failing to score highly on SCHD’s yield factor.

This means the two funds can behave very differently in the same market. When technology leads, VIG tends to do better, and when energy and value stocks lead, SCHD tends to do better. FRC’s guide to growth stocks vs value stocks explains how the two styles differ.

Dividend Yield

A fund’s yield is the income it pays over a year relative to its share price. FRC’s dictionary entry on current yield explains how this kind of measure works.

SCHD’s yield is far higher than VIG’s. In March 2026, SCHD’s 30-day SEC yield was roughly 3.4%, while VIG’s was about 1.6%, less than half as much.

That gap is the single biggest practical difference for an income investor. On $100,000, a 3.4% yield produces about $3,400 a year, while a 1.6% yield produces about $1,600.

Dividend Growth

VIG is built entirely around dividend growth, since every company it holds must have raised its payout for at least 10 years in a row. Its quarterly dividend has risen from about $0.23 a share in early 2010 to almost $1.00 a share by mid-2026.

SCHD also scores companies on dividend growth, and it has built a strong record of rising payouts since launch. FRC’s guide to SCHD’s dividend history shows every payout, year by year.

For investors with a long time horizon, dividend growth can count for as much as the starting yield. A lower yield that grows quickly can eventually produce more income on the original investment than a higher yield that grows slowly.

The Cost: Both Very Low

VIG charges an expense ratio of 0.04%, or $4 a year for every $10,000 invested. SCHD charges 0.06%, or $6 a year for every $10,000.

The 0.02 percentage point difference amounts to $20 a year on $100,000. Both are among the cheapest dividend funds available, so cost is rarely a deciding factor.

Both funds trade with tight bid-ask spreads and are available commission-free at most major US brokerages. Trading costs are effectively the same.

Performance Over Time

Over long periods, the two funds have produced similar total returns despite their very different approaches. Figures published in March 2026 showed their 10-year total returns within a few percentage points of each other, with both trailing the total US stock market.

The path to those returns has been very different. In 2022, when the S&P 500 fell about 18% and technology stocks were hit hard, SCHD lost only about 3% while VIG fell roughly 10%.

In years when large technology companies led the market, VIG has generally done better, as in 2023, when it returned about 14.5% against SCHD’s 4.5%. Over the five years to early November 2026, the two funds’ annualized returns were almost identical at about 10.5% a year, and SCHD was well ahead in 2026.

Volatility and Risk

SCHD’s concentration in about 100 stocks and its heavy weightings in energy and consumer staples mean its results depend heavily on those sectors. A sharp fall in oil prices, for example, could hit several of its larger holdings at once.

VIG’s larger technology weighting makes it more sensitive to swings in technology stocks. However, its broader spread of holdings means any single company has less effect on the fund.

Both funds tend to be less volatile than the broad market, because they hold mature, profitable companies. Neither is immune to market downturns, and both can fall significantly in a bear market.

Overlap Between the Two

The overlap between SCHD and VIG is smaller than many investors expect. Some companies, such as certain consumer staples and healthcare names, can appear in both, but each fund holds many companies the other does not.

VIG’s exclusion of the highest yielders removes many of the companies SCHD favors. Meanwhile, SCHD’s yield factor means it rarely holds the lower-yielding technology giants that sit at the top of VIG.

This low overlap is one reason SCHD and VIG are a common pairing. Holding both gives exposure to two quite different groups of dividend companies.

Taxes on SCHD and VIG

Both funds are tax-efficient ETFs that rarely distribute capital gains. Most of their dividends are qualified dividends, taxed at the lower long-term capital gains rates if you meet the holding period.

SCHD’s higher yield means it generates a larger tax bill each year when held in a taxable account. VIG’s lower yield produces less taxable income, with more of its return coming from share price growth, which is only taxed when you sell.

That makes VIG somewhat more tax-friendly in a taxable account, and makes SCHD a natural candidate for an IRA or 401(k). FRC’s guides to qualified vs non-qualified dividends, tax-efficient ETFs for a taxable brokerage account and how to minimize capital gains tax explain how to keep tax bills low.

Tax-Loss Harvesting Between the Two

Because SCHD and VIG track different indexes and hold different companies, some investors use them as tax-loss harvesting partners. If one falls in value, they sell it to realize a loss and buy the other to stay invested in dividend stocks.

The wash sale rule disallows a loss if you buy a substantially identical security within 30 days before or after the sale. Funds tracking different indexes with different holdings are generally considered a lower-risk pairing, although the IRS has not defined the term precisely for funds.

Investors planning to use this approach should take professional tax advice. A disallowed loss is added to the cost of the new shares, so it is deferred rather than lost entirely.

Worked Example: A Retiree Seeking Income

A retiree invests $200,000 in a dividend fund to supplement their pension. At SCHD’s March 2026 yield of about 3.4%, that would produce around $6,800 a year before tax.

The same $200,000 in VIG, at a yield of about 1.6%, would produce around $3,200 a year. For a retiree who needs income now, that difference is significant.

To get the same income from VIG, the retiree would need to sell some shares each year. That can work, but it requires more planning and exposes them to selling during market downturns.

Worked Example: A Younger Investor Building Wealth

A 30-year-old investor reinvests all dividends for 30 years and has no need for income. For this investor, total return counts for more than the current yield.

VIG’s lower yield and stronger technology exposure may suit this investor’s long time horizon, and its lower taxable income is helpful in a taxable account. Reinvested dividends from either fund compound over time, an example of compound interest at work.

FRC’s guide to how compound interest builds wealth in ETFs shows how that growth builds up. Many younger investors also hold a broad market fund alongside any dividend fund, as FRC’s comparison of SCHD vs VOO explains.

Who Tends to Choose SCHD

Income investors who want a higher yield today often choose SCHD. Its quality screens appeal to those who want companies with strong balance sheets and long dividend records.

Retirees and those approaching retirement often favor SCHD for its income, frequently holding it in an IRA to avoid annual tax on the dividends. Its strong performance in 2022 also appeals to investors who value resilience in downturns.

Investors who want to balance a technology-heavy portfolio sometimes add SCHD for its energy, consumer staples and healthcare exposure. It behaves quite differently from the S&P 500.

Who Tends to Choose VIG

Investors who value consistent dividend growth over high current income often choose VIG. Its 10-year growth rule appeals to those who see steady increases as a sign of a well-run business.

Younger investors and those holding dividend funds in taxable accounts sometimes prefer VIG for its lower yield, stronger growth exposure and smaller annual tax bill. Its heavier technology weighting gives it more participation in market rallies.

Investors who already use Vanguard funds may also choose VIG to keep their holdings in one place. FRC’s comparison of SCHD vs VYM covers Vanguard’s other popular dividend fund.

Can You Own Both?

Many investors hold SCHD and VIG together, and this is one of the more effective dividend fund pairings. Because the overlap is low and their sector mixes are so different, the two funds complement each other.

Holding both combines SCHD’s higher yield and value tilt with VIG’s dividend growth and technology exposure. The blend has a yield between the two and a more balanced sector mix than either fund alone.

Investors still need to consider the rest of their portfolio. A complete portfolio usually also includes broad market, international and bond exposure, rather than relying entirely on dividend funds.

How They Compare With Other Popular Dividend Funds

VYM, the Vanguard High Dividend Yield ETF, sits between SCHD and VIG in many respects. It holds around 600 higher-yielding companies weighted by size, with a yield above VIG’s but generally below SCHD’s.

Covered call funds such as JEPI aim for much higher income by selling options on the stocks they hold. FRC’s guide to covered call ETFs explains how they work and what investors give up for the extra income.

Each type of dividend fund balances current income, growth and risk differently. The right mix depends on whether you need income now or are building wealth for later.

Is Your Money Safe in SCHD or VIG?

Both funds are regulated investment companies overseen by the SEC, with their holdings kept by independent custodians and separate from the fund companies’ own assets. FRC’s guides to Is Charles Schwab Safe? and Is Vanguard Safe? explain how each firm is structured and regulated.

When you hold either fund at a SIPC member brokerage, your account is protected up to $500,000, including $250,000 in cash, if the brokerage fails and assets are missing. This protection does not cover market losses.

Like all stock funds, both SCHD and VIG will rise and fall with the market, and their dividends can fall if the companies they hold cut their payouts. Their safeguards protect the safekeeping of your investments, not their value or income.

Keep Learning

SCHD and VIG show that dividend investing is not one strategy but several. One fund rewards high, well-covered yields, while the other rewards steady growth and screens out the highest yields altogether.

The FRC dictionary is more than a dictionary. It is a library of explainer videos, written explanations and on-page quizzes, so you can open any term, such as ex-dividend, and go deeper whenever something is unclear.

FRC’s programs and memberships are open to everyone. FRC’s Investing for Beginners guide is a natural next step if you are building your first portfolio.

Your Next Step

SCHD holds about 100 quality-screened companies with a higher yield and a tilt towards energy, consumer staples and healthcare. VIG holds more than 300 consistent dividend raisers, excludes the highest yielders and carries much more technology, giving it a lower yield and stronger growth exposure.

Choose SCHD if you need income now, VIG if you are focused on dividend growth and long-term wealth, or hold both for a balanced mix, then focus on reinvesting and investing consistently over time.