The Schwab US Dividend Equity ETF (SCHD) is underperforming the broader market and most of its peers. Its total return has been 4.49% this year while the SPDR S&P 500 and Invesco QQQ (QQQ) ETFs have jumped by almost 10%.
In my last report on SCHD, I compared it with the Pacer Cash Cow 100 ETF (COWZ), which I believe is the best dividend ETF in the market. COWZ, unlike other funds, focuses on companies that generate substantial free cash flows.
This article will look at three more solid dividend ETFs to consider, including the VIG, DGRO, and the VYM.
SCHD vs DGRO vs VIG vs VYM
Vanguard Dividend Appreciation ETF (VIG)A common mistake that many dividend investors make is to focus on the dividend yield. While a higher yield is good, I believe that growth is a better figure to look at.
The Vanguard Dividend Appreciation ETF is a popular ETF that tracks the S&P US Dividend Growers Index. This index invests in large American companies that have a long history of growing their returns. It has over $93 billion in total assets.
The VIG ETF has 315 companies across all industries. Most of its companies are in the technology sector followed by financials, health care, and industrials. SCHD, on the other hand, lacks big technology companies.
The biggest companies in the VIG ETF are the likes of Microsoft, Apple, Broadcom, JP Morgan, and UnitedHealth Group. These are the same companies that make up the SPY ETF, meaning that the two have a close correlation.
The VIG ETF has a long history of beating SCHD. Its total return in the past 10 years stood at 140%, higher than the latter’s 116%. It has risen by 61% in the past five years while the SCHD has jumped by 48%.
iShares Core Dividend Growth (DGRO)The iShares Core Dividend Growth ETF (DGRO) is another SCHD alternative to consider. It is made up of 419 companies across all sectors. Also, it is a huge ETF with over $26 billion in assets.
The fund is significantly different from SCHD, especially in terms of its composition. The biggest constituents are in the financials segment followed by information technology, health care, industrials, and consumer staples.
Some of the biggest firms in the DGRO ETF are Exxon Mobil, Microsoft, Chevron, JPMorgan, and Apple. DGRO has a good record of growing its dividends. Its CAGR rate in the past five years was 9.70% .
The fund has also outperformed SCHD. Its total returns in the past five years stood at 52.85% while SCHD has grown by 48%. Year-to-date, the fund has grown by 6.455 against SCHD’s 4.49%.
Vanguard High Dividend Yield Fund (VYM)The Vanguard High Dividend Yield Fund (VYM) is another popular SCHD alternative. This fund tracks the FTSE High Dividend Yield Index, which focuses on companies with strong dividend yields. It has $67 billion in total assets.
VYM is a highly diversified ETF with companies across all sectors. The biggest constituent is financials followed by industrials and consumer staples. The most notable names in the fund are Broadcom, JPMorgan, Exxon, Johnson & Johnson, and Home Depot.
VYM has been a strong performer over time. It has jumped by 7.10% this year and by 37% in the past five years. All these funds are good. However, I believe that they should exist in a portfolio to complement those that track the S&P 500 and Nasdaq 100. Historically, these two ETFs have been some of the best performers in Wall Street.
The post Best SCHD ETF alternatives: VIG, DGRO, and VYM appeared first on Invezz
