Dividend ETFs Compared: VYM vs. SCHD vs. DVY vs. DGRO for Passive Income

Many investors seek passive income through dividend investing. dividend ETFs offer a diversified approach to this strategy, but choosing the right one requires careful consideration. With over 170 dividend ETFs available, the top three hold over $210 billion in assets, representing almost half of the category’s total assets under management (etf.com). This article compares four popular dividend ETFs: Vanguard High Dividend Yield ETF (VYM), Schwab U.S. Dividend Equity ETF (SCHD), iShares Select Dividend ETF (DVY), and iShares Core Dividend Growth ETF (DGRO), highlighting their key differences to help investors make informed decisions.

Understanding Dividend ETF Basics

dividend ETFs pool money from multiple investors to buy stocks of companies that regularly pay dividends. This provides instant diversification, reducing the risk associated with investing in individual stocks. The ETF then distributes the dividend income received from these stocks to its shareholders, offering a stream of passive income. However, different ETFs employ varying strategies for selecting their holdings, leading to differences in yield, growth potential, and risk profiles.

VYM: Vanguard High Dividend Yield ETF

VYM seeks to track the FTSE High Dividend Yield Index (etf.com). It focuses on large-cap U.S. companies that pay above-average dividends. This ETF holds a diverse portfolio of over 500 stocks (dividendgrowthlab.com), with significant allocations to sectors like financials and technology.

• Investment Strategy: VYM aims for broad exposure to dividend-paying stocks while avoiding companies with excessively high payout ratios, which might indicate financial instability (etf.com).
• Key Metrics: As of January 30, 2025, VYM had approximately $61.3 billion in assets under management (AUM), an expense ratio of 0.06%, and a dividend yield of 2.68% (etf.com).
• Performance: VYM has demonstrated strong performance, with a 1-year return of 20.31%, a 3-year return of 9.60%, a 5-year return of 10.85%, and a 10-year return of 10.55% as of early 2025 (etf.com). In 2025, VYM significantly outperformed SCHD, with a return of 15.42% compared to SCHD’s 4.34% (dividendgrowthlab.com).
• Pros: Low costs, broad diversification across many stocks and sectors.
• Cons: May include some lower-quality companies to achieve high yield (retireearlywithdividends.com).

SCHD: Schwab U.S. Dividend Equity ETF

SCHD aims to track the Dow Jones U.S. Dividend 100 Index (etf.com). It emphasizes dividend-paying companies with strong fundamentals, such as solid cash flow, high returns on equity, and consistent dividend growth. SCHD’s portfolio is more concentrated than VYM’s, holding around 100 stocks (dividendgrowthlab.com).

• Investment Strategy: SCHD focuses on the quality and sustainability of dividends, selecting companies with a history of consistent dividend payments and strong financial health (etf.com).
• Key Metrics: As of January 30, 2025, SCHD had approximately $67.9 billion in AUM, an expense ratio of 0.06%, and a dividend yield of 3.70% (etf.com).
• Performance: SCHD has shown solid long-term performance, but has lagged VYM in recent years. Its 1-year return as of early 2026 was 11.3% (fool.com). Over the past three years, VYM has nearly doubled SCHD’s gains (dividendgrowthlab.com).
• Pros: Higher dividend yield, focus on quality companies, strong emphasis on financial health (retireearlywithdividends.com).
• Cons: More concentrated portfolio, may underperform in certain market environments (dividendgrowthlab.com).

DVY: iShares Select Dividend ETF

DVY tracks the Dow Jones U.S. Select Dividend Index. This index measures the performance of a selected group of dividend-paying U.S. companies. DVY generally holds around 100 stocks, similar to SCHD but with a different selection methodology.

• Investment Strategy: DVY selects companies based on their dividend yield history. The fund aims to provide a high level of current income by investing in companies that have consistently paid dividends.
• Key Metrics: DVY’s expense ratio is typically around 0.38%, significantly higher than VYM and SCHD. The dividend yield fluctuates, but is generally competitive within the high-yield dividend ETF space.
• Holdings and Sector Allocation: DVY tends to have a higher allocation to sectors like utilities compared to SCHD and VYM.
• Pros: Focus on high current income.
• Cons: Higher expense ratio, potential for lower growth due to sector allocation.

DGRO: iShares Core Dividend Growth ETF

DGRO tracks the Morningstar U.S. Dividend Growth Index. This index focuses on companies with a history of growing their dividends, rather than simply offering a high current yield.

• Investment Strategy: DGRO selects companies that have increased their dividend payments for at least five consecutive years. It excludes the top 10% highest-yielding companies to avoid those that may be financially unsustainable.
• Key Metrics: DGRO generally has an expense ratio of around 0.08%. The dividend yield is typically lower than SCHD and DVY but offers potential for higher dividend growth over time. As of November 2025, DGRO’dividend yield was 2.02% (mezzi.com).
• Performance: DGRO boasts a strong 10-year annualized return of 13.01% (mezzi.com).
• Pros: Focus on dividend growth, potential for long-term capital appreciation (mezzi.com).
• Cons: Lower current dividend yield, may underperform in periods where high-yield stocks are favored.

Performance Comparison

While past performance is not indicative of future results, examining historical returns can provide insights into how these ETFs behave under different market conditions. VYM has outperformed SCHD in recent years, with an 11 percentage point difference in 2025 (dividendgrowthlab.com). However, SCHD led in performance from 2019-2021 (dividendgrowthlab.com). DGRO has shown strong long-term growth due to its focus on companies with a history of dividend increases. DVY’s performance is often influenced by its sector allocations, particularly its exposure to utilities.

(dividendgrowthlab.com)

Choosing the Right Dividend ETF

The best dividend ETF for an investor depends on their individual investment goals, risk tolerance, and income needs.

• For High Current Income: SCHD and DVY are suitable options, but DVY’s higher expense ratio should be considered. SCHD offers a blend of quality and yield, while DVY focuses primarily on high dividend payouts.
• For Long-Term Growth: DGRO is a strong choice, prioritizing companies with a history of dividend increases. While the current yield may be lower, the potential for future dividend growth can be attractive for long-term investors.
• For Broad Diversification: VYM provides the widest exposure to dividend-paying stocks, making it a good option for investors seeking diversified passive income with lower risk.

Conclusion

Selecting the appropriate dividend ETF requires a thorough understanding of each fund’s investment strategy, risk profile, and performance history. VYM offers broad market exposure and competitive returns, while SCHD emphasizes quality and higher yields. DVY focuses on high current income, and DGRO prioritizes dividend growth. By carefully evaluating these factors, investors can choose the dividend ETF that aligns best with their individual financial objectives.

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Disclaimer: This content is for educational and informational purposes only and does not constitute financial, investment, or tax advice. The information presented reflects the author’s opinions and analysis at the time of writing and may not be suitable for your individual circumstances. Always consult with a qualified financial advisor before making investment decisions. Past performance is not indicative of future results. MinMaxDoc and its authors are not registered investment advisors.