Even if you follow the stock market intermittently, you know that dividend ETFs are having a moment. The thing is, this current trend of conversation around dividend ETFs is only going to grow as interest rates decline and investors rotate out of cash positions and seek higher yields in their portfolios to generate income.
Vanguard High Dividend Yield ETF (VYM) is up 11.78% year to date and offers a 2.51% yield with a $3.52 annual dividend.
Schwab US Dividend Equity ETF (SCHD) holds 103 stocks with a 3.89% yield and shows 5.79% dividend growth.
Vanguard prioritizes breadth across hundreds of stocks while Schwab focuses on concentrated holdings with higher yields.
Some investors get rich while others struggle because they never learned there are two completely different strategies to building wealth. Don’t make the same mistake, learn about both here.
As you look deeper at the diversified battle, nowhere is it more competitive than in the ETF world, specifically between Vanguard and Schwab’s various holdings. Two of the biggest names in the investment world are front and center for investors, both retail and professional alike, who look to create more wealth using dividends.
It’s safe to say that in 2025, this battle between two giants has become a closely watched duel in passive investing. Vanguard focuses on scale and simplicity, which has attracted more patient and long-term investors. On the other hand, you have Schwab, which offers a more curated approach ideal for investors seeking precision trading across large portfolios.
There may not be a bigger name in the dividend ETF world, thanks to some of its holdings being among the most popular in an already crowded industry. You could even say that Vanguard is the definition of what it means to “own the market.” In this sense, Vanguard’s selection of dividend ETFs gives you an opportunity and exposure to almost every corner of the market, from high-yield names to companies that have been consistent dividend payers for decades.
The firm’s flagship name is the Vanguard High Dividend Yield ETF (NYSE:VYM), which is the current benchmark for broad-based income. The ETF is currently up 11.78% YTD and offers a current yield of 2.51%, with a quarterly payout of 84 cents per share on September 19. The annual dividend of $3.52 is definitely attractive to investors who want to put money into the Vanguard High Dividend Yield ETF and “chill.”
Alternatively, you have the Vanguard Dividend Appreciation ETF (NYSE:VIG), which offers a more refined approach. This ETF is very attractive to investors who want to look at companies that have increased their dividends for at least 10 consecutive years, which adds a level of confidence.
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Its yield of 1.64% is lower than some of the others in the Vanguard portfolio, but the $3.55 annual dividend is especially attractive right now. With names like Microsoft, Broadcom, JP Morgan, and Apple, you have broad exposure across hundreds and hundreds of individual stocks.
Ultimately, Vanguard’s advantage, even against Schwab, is based on one word: scale. With the idea that Vanguard ETFs hold hundreds of dividend-paying companies across various sectors and geographies, you have ETFs that smooth out even during volatile times. The best takeaway with Vanguard is to “buy it and forget it,” with the understanding that few ETFs are as time-tested as those run by Vanguard.
Compared to Vanguard’s dividend strategy of casting a wide net, Schwab takes a more precision-driven approach. At the height of the Schwab world is the Schwab U.S. Dividend Equity ETF (NYSE:SCHD), which has quickly become one of the most popular ETFs in the market, driven by retail investors and Redditors alike.
Holding just 103 stocks right now, its biggest position is just 4.66% of the portfolio, and its most prominent positions are among some of the biggest names around, like Cisco, Coca-Cola, Chevron, and more. With a current yield of 3.89%, the annual dividend of $1.03 doesn’t quite compare to Vanguard’s options, but the ETF’s 5.79% dividend growth is why it’s become incredibly popular. Add in an expense ratio of 0.06% and this is an ETF for the everyday investor.
Of course, Schwab U.S. Dividend Equity ETF isn’t the only staple in the Schwab portfolio, but it’s undoubtedly the most popular. However, if you want to look at a large-cap ETF that captures stocks with modest yields around 2.3%, you can opt for the Schwab U.S. Large-Cap Value ETF (NYSE:SCHV), though it only offers an annual dividend of $0.60.
Fans of Schwab ETFs need to know that it emphasizes discipline and that they won’t hold every high-yield stock, only those with durable cash flows and long histories of rewarding shareholders.
If you have to decide between just going with Vanguard ETFs or those from Schwab, your decision is going to come down to two things: breadth or precision.
Vanguard’s strength is its breadth, making it ideal for long-term investors who want to mirror the market, receive strong dividends, and not worry about quarterly rotations in their portfolios. The downside of being in the Vanguard world is that you have a stable yield, but it can often lag behind more concentrated strategies.
On the other hand, you have Schwab, which is more about focus and precision. Its approach, whether through Schwab U.S. Dividend Equity ETF or another ETF, is to focus on delivering high yields and more sector concentration. It’s an ideal choice for investors who want to be very deliberate about where their passive ETF income is coming from and don’t mind holding a smaller basket of names.
As interest rates decline, I know it’s hard to decide where to park your cash, but having the right dividend strategy will be critical to positioning you for passive income growth and a sizable nest egg down the road.
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