Investment Strategy2025-09-30
Dividend ETF Popularity Surges... SCHD vs VYM Selection Guide
As market volatility increases, interest in dividend ETFs that provide stable cash flow is growing. We examine dividend investment strategies centered on SCHD and VYM.
관리자CNBC
As market volatility has expanded toward the end of the third quarter, dividend ETFs offering stable dividend income are back in the spotlight. In particular, SCHD (Schwab U.S. Dividend Equity ETF) and VYM (Vanguard High Dividend Yield ETF) represent the two pillars of U.S. dividend investing, each with distinct characteristics and advantages. SCHD takes a selective approach that prioritizes dividend growth and company quality, concentrating in approximately 100 holdings, while VYM prioritizes dividend yield and invests broadly across approximately 460 holdings. With growing expectations of Fed rate cuts, the relative appeal of dividend stocks has increased, and these ETFs can serve as core portfolio assets for retirement-focused investors or those who value cash flow. It is important to use the asset allocation calculator to find the optimal balance between growth stocks and dividend stocks, and to select dividend ETFs that match your individual investment goals.
Advantages of Dividend Investing and the Current Environment
The greatest advantage of dividend investing is that it provides stable cash flow regardless of stock price fluctuations. Quarterly dividends can be reinvested for compounding benefits or used for living expenses, making them especially attractive for retirees or those preparing for retirement. Companies that consistently pay dividends tend to have strong financial health and mature business models, giving them relatively strong defensive characteristics during market downturns. During the 2022 bear market, when the S&P 500 fell -18%, SCHD dropped only -8% and VYM only -5%. The current environment is favorable for dividend stocks. As expectations of Fed rate cuts push bond yields lower, the relative attractiveness of dividend stocks is rising. SCHD currently yields approximately 3.6% and VYM approximately 3.1% — similar to or slightly below the 10-year Treasury yield of 3.78% — but when dividend growth potential is factored in, they may outperform bonds over the long term. Additionally, in an inflationary environment, dividend growth serves as a purchasing power protection tool, and companies that consistently raise dividends often deliver dividend growth rates that exceed inflation. SCHD’s historical 10-year dividend growth rate has averaged approximately 12% annually, far outpacing inflation.
SCHD: Characteristics and Investment Strategy
SCHD is an ETF launched in 2011 that tracks the Dow Jones U.S. Dividend 100 Index. Rather than simply selecting stocks with the highest dividend yield, this index comprehensively evaluates quality metrics such as dividend growth consistency, financial soundness, ROE, and cash flow to select the top 100 holdings. Its expense ratio is an extremely low 0.06%, and its dividend yield is approximately 3.6%. Top holdings include large-cap blue-chip companies such as BlackRock, Texas Instruments, Pfizer, AbbVie, and Cisco. Sector allocation is diversified across financials (25%), industrials (15%), healthcare (14%), and technology (13%), among others. SCHD’s greatest strength is dividend growth. Over the past 10 years, its dividend has grown at an average annual rate of 12%, meaning the yield on cost relative to the original investment continuously increases. For example, an investor who bought in 2015 started with a 3% dividend yield, but as of 2025 is receiving approximately 9% in dividends relative to the original principal. Capital appreciation has also been excellent, with a 10-year annualized total return of approximately 12.5%, matching or exceeding the S&P 500. SCHD is well-suited for investors with a long-term horizon (10+ years) who seek both compounding through dividend growth and capital appreciation. Allocating 20–30% of a portfolio to SCHD and combining it with growth-oriented ETFs such as QQQ or VOO can achieve a balance of growth and stability.
VYM: Characteristics and Comparative Analysis
VYM is Vanguard’s flagship dividend ETF, launched in 2006, tracking the FTSE High Dividend Yield Index. It invests in approximately 460 stocks with expected dividend yields above the market average, offering significantly broader diversification than SCHD. Its expense ratio is 0.06%, identical to SCHD, while its dividend yield is approximately 3.1%, somewhat lower than SCHD’s. Top holdings include Broadcom, Johnson & Johnson, ExxonMobil, JPMorgan, and Procter & Gamble, with sector allocation spread across financials (22%), healthcare (14%), consumer staples (13%), and energy (11%), among others. VYM’s strengths lie in broad diversification and low volatility. With 460 holdings, individual company risk is very low, and a beta of approximately 0.85 means it is less volatile than the overall market. Its 10-year annualized return of approximately 10.8% is slightly below SCHD’s, but its smaller maximum drawdown means it offers superior defensive characteristics. Criteria for choosing VYM vs. SCHD are as follows: if you prioritize dividend growth and want to maximize long-term compounding, SCHD is advantageous — its current yield is higher and its dividend growth rate is greater, meaning more dividends over the long run. On the other hand, if you want maximum diversification and a lower-risk, stable portfolio, VYM is the better fit. VYM also offers lower sector risk through even exposure to traditional dividend sectors such as financials, healthcare, consumer staples, and energy. Holding a 50:50 blend of both ETFs is also a sound strategy, allowing you to benefit from both SCHD’s dividend growth potential and VYM’s diversification, effectively investing in approximately 280 holdings.
Dividend Reinvestment Strategy and the Power of Compounding
One of the most important strategies in dividend ETF investing is the Dividend Reinvestment Plan (DRIP). Reinvesting received dividends back into the same ETF rather than spending them significantly enhances long-term returns through compounding. For example, if you invest ,000 in SCHD without reinvesting dividends, you might have approximately ,000 after 10 years; with dividend reinvestment, that figure grows to approximately ,000 — a difference of ,000. This is the power of compounding, where reinvested dividends generate additional dividends. Most brokerages offer an automatic dividend reinvestment feature that can be set up to automatically purchase additional shares of the same ETF when dividends are paid. This allows fractional reinvestment with no transaction fees, making it highly efficient. Another advantage of dividend reinvestment is the dollar-cost averaging effect. Automatically buying a set amount each quarter means you purchase more shares when prices are low and fewer when prices are high, lowering your average cost per share. However, in taxable accounts, taxes are owed on dividends even when reinvested, so it is advantageous to hold dividend investments in tax-advantaged accounts such as IRAs or 401(k)s whenever possible. In regular taxable accounts, dividend income tax (up to 20% plus state tax) must be paid annually, but in tax-advantaged accounts, taxation is deferred until withdrawal, maximizing the compounding effect. If you plan to use dividends for living expenses in retirement, a strategy of gradually increasing your dividend ETF allocation in the 5–10 years before retirement to secure sufficient dividend cash flow by the time you retire is highly effective.
Balanced Portfolio: Dividend Stocks and Growth Stocks
Building a portfolio of dividend stocks alone can provide stability but may limit growth potential. Conversely, holding only growth stocks offers high return potential but comes with greater volatility and downside risk. It is therefore important to adjust the ratio of dividend stocks to growth stocks based on your age and investment goals. For investors in their 30s and 40s, a 70% growth / 30% dividend allocation is recommended. A structure such as QQQ 40%, VOO 30%, SCHD 20%, AGG 10% prioritizes capital appreciation while using dividends to add stability. For investors in their 50s, a balanced 50% growth / 50% dividend split is appropriate. A composition such as VOO 30%, SCHD 25%, VYM 20%, AGG 20%, cash 5% begins shifting toward retirement preparation while expanding dividend cash flow. For retirees aged 60 and above, stability takes top priority with a 60% dividend / 30% bond / 10% cash allocation. A conservative composition such as SCHD 30%, VYM 30%, AGG 20%, TLT 10%, cash 10% relies on dividend and interest income while minimizing stock price fluctuation risk. Common to all age groups is the importance of rebalancing. Using a rebalancing calculator quarterly or semi-annually to check each asset’s weighting and adjust any deviation from target levels keeps the portfolio’s risk profile consistent. In particular, since dividend reinvestment can gradually increase the dividend stock weighting over time, it is necessary to regularly review the overall allocation.
결론
Dividend ETFs are an excellent investment vehicle that provides stable cash flow and long-term compounding benefits. SCHD emphasizes dividend growth and quality, while VYM prioritizes diversification and stability — you can choose one or hold both depending on your investment goals. Use the asset allocation calculator to set the right dividend stock weighting for your age and risk tolerance, and build long-term wealth through consistent dividend reinvestment.
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#SCHD#dividend ETF#VYM#dividend investing#asset allocation calculator#rebalancing calculator#cash flow
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