Investment Strategy2026-02-09

Dividend ETF SCHD JEPI Strategy

With SCHD and JEPI posting annual returns of 17% and 9% respectively, interest in dividend ETFs is growing. This article compares the strategies of both ETFs and explores how to use them effectively in a portfolio.

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As value rotation and a high-interest-rate environment converge, dividend ETFs are entering their golden era. SCHD (Schwab U.S. Dividend Equity ETF) has posted a total annual return of 17.0% at $31.47, approaching its 52-week high. JEPI (JPMorgan Equity Premium Income ETF) continues to attract monthly dividend investors with a high yield of 8.02% at $59.11. Despite sharing the 'dividend' label, these two ETFs employ fundamentally different strategies. This guide explains how to build an optimal dividend portfolio using an asset allocation calculator.

SCHD's Dividend Growth Strategy

SCHD tracks the Dow Jones U.S. Dividend 100 Index, selecting 101 stocks with strong fundamentals from companies that have paid dividends for 10 consecutive years. With an expense ratio of just 0.06%, it is extremely cost-efficient, offering a dividend yield of 3.33% and a P/E ratio of 16.38x—a reasonable valuation. Top holdings include Lockheed Martin (4.56%), Texas Instruments (4.39%), and Chevron (4.24%), diversified across sectors such as defense, semiconductors, and energy. An annualized return of 13.25% since inception demonstrates the long-term effectiveness of a dividend growth strategy.

JEPI's Covered Call Income Strategy

JEPI invests in S&P 500 large-cap stocks while executing a covered call strategy through equity-linked notes (ELNs). Its dividend yield of 8.02% is more than double that of SCHD, and its monthly distributions make it well-suited for retirees seeking regular cash flow. However, due to the nature of covered calls, upside participation is capped in bull markets—a structural limitation that can lead to underperformance relative to SPY. With an expense ratio of 0.35% and $43 billion in AUM, JEPI is a large fund diversified across 126 large-cap stocks, including Johnson & Johnson and Howmet Aerospace.

A Combined SCHD and JEPI Strategy

Combining SCHD and JEPI allows investors to pursue both dividend growth and high income simultaneously. An allocation of 60% SCHD and 40% JEPI delivers a blended dividend yield of approximately 5.2% while retaining capital appreciation potential. Adding a 20% allocation to AGG further incorporates bond stability into the portfolio. AGG's dividend yield of 3.88% strengthens the overall income foundation. By using a rebalancing calculator to adjust the weighting among dividend ETFs on a quarterly basis, investors can maintain an optimal income portfolio that adapts to changing market conditions.

Dividend Reinvestment and the Power of Compounding

A dividend reinvestment (DRIP) strategy can make a decisive difference in long-term returns. An investor who put money into SCHD ten years ago and reinvested all dividends would have achieved a compounded annual return of 13.25%. Similarly, reinvesting JEPI's monthly dividends compounds that ~8% yield over time. Running a dividend reinvestment scenario through an asset allocation calculator lets you project your expected portfolio value 10 or 20 years out. Because dividend ETFs truly shine through long-term holding and reinvestment rather than short-term trading, patience is essential.

Conclusion

SCHD's dividend growth strategy and JEPI's high-yield income strategy are complementary. If capital appreciation is the priority, increase the SCHD allocation; if immediate cash flow is needed, lean more heavily on JEPI. Combining both with AGG creates a well-rounded portfolio that balances equities, bonds, and dividend income. Regular rebalancing with a rebalancing calculator is the key to long-term dividend investing success.

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