Both the Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) and the Schwab U.S. Dividend Equity ETF (SCHD) are pitched on the same premise of generous payouts from large American firms. But their underlying holdings diverge sharply, and so does their performance. Over the last ten years, SCHD has nearly tripled the returns of SPHD, and the margin holds across every period the source cites.
This passage sets out what occurred, and explains why it holds significance for anyone considering dividend income.
What Each Fund Actually Does
The fund begins with the 75 highest-yielding securities in the S&P 500, then holds onto the 50 with the smallest realized volatility and weights them by yield. This leaves the portfolio weighted toward utilities, real estate investment trusts (REITs), and consumer staples. The idea behind it is that current income takes priority over growth, and a portfolio of steady, low-volatility stocks should compound reliably over time.
The SCHD fund takes the opposite path. It follows the Dow Jones U.S. Dividend 100 Index, an index that demands at least 10 consecutive years of dividend payments from its members. Those survivors are then ranked using cash-flow-to-total-debt, return on equity, yield, and five-year dividend growth. This method acts as a quality filter with yield serving as the deciding factor. The fund’s wager rests on the idea that firms producing abundant cash and increasing their payouts will outpace rivals offering higher yields but growing more slowly.
Both funds are chasing the same investors’ interest, yet they rest their case on opposing premises about what moves returns.
The Ten-Year Track Record
In the last decade, the distance between these two funds has grown wide indeed. SPHD has delivered 102.88%, whereas SCHD has produced 244.64%. The contrast is anything but slight; it is a vast divide.
The gap shows up across every time frame the source lists:
- Year to date: SCHD is up 27.47% versus SPHD’s 10.39%
- Five years: SCHD returned 61.21% against SPHD’s 43.81%
During the 2022 rate shock, SPHD’s low-volatility screen filtered out the market’s volatile parts. That worked as intended. However, the screen also filtered out the semiconductor and healthcare companies whose steady growth drove SCHD’s gains.
The Dividend Growth Story
The dividend payouts tell part of the story. SPHD pays monthly, and its payouts have grown only modestly over the decade. SCHD pays quarterly, and its payout has climbed roughly fivefold since 2011.
SCHD’s rising payout stems from holdings that have increased their dividends for ten years or more. The quality screen favors firms with robust cash flow, a strong return on equity, and a track record of dividend growth. SPHD’s weighting system, which gives more weight to stocks based on their dividend yield, steers it toward rate-sensitive utilities and REITs — sectors that spent 2022 through 2024 locked in a losing struggle against falling Treasury yields.
The Cost of Ownership
A portion of the gap can be attributed to the expense ratios themselves. SPHD charges 0.30% annually, whereas SCHD charges 0.06%. Over a decade, that distinction accumulates into a substantial advantage for SCHD, compounding its lead in performance.
An investor who keeps either fund over a long stretch gains from the lower fee. Each dollar kept through reduced charges stays in the portfolio instead of going to fees, and that difference compounds with time.
Who Holds What Now
The current holdings of SCHD demonstrate what its quality screen generates. Qualcomm takes up 6.74% of assets, Texas Instruments sits at 5.90%, and UnitedHealth rests at 5.09%. These are technology and healthcare names rather than the bond-like defensive stocks held by SPHD. Instead of acting as a bond substitute, the portfolio behaves more like a broad-market fund with a dividend slant.
The way SPHD weights its holdings by yield pushes it further into rate-sensitive utilities and REITs, sectors that fought a losing battle with Treasury yields from 2022 through 2024.
What This Means for Investors
The lesson from this decade is straightforward: dividend filters do not all perform the same way. A fund focused on yield can deliver a consistent flow of income, yet it can also lock you into rate-sensitive industries. A fund that prioritizes quality and dividend growth, meanwhile, can generate greater total returns, even though its income stream grows at a slower pace.
SPHD and SCHD were not separated by chance. Their difference stems from deliberate choices about what each fund pursues. One fund is built around current income, while the other is built around future income. Across a ten-year stretch, the fund with the future-income approach came out ahead.
Both funds sell themselves as high-dividend plays. One fund delivers mostly income. The other delivers mostly growth. The investor who bought SPHD expecting capital gains got them in name only. The investor who bought SCHD expecting a rising income stream got both.
The Bottom Line
Both SPHD and SCHD offer generous dividends, but only one has produced strong returns. The difference between them has grown over ten years.
The key differences to remember are:
- SPHD weights by yield, anchoring in utilities, REITs, and consumer staples
- SCHD ranks by cash flow, return on equity, and dividend growth, anchoring in technology and healthcare
- SPHD’s payouts grew modestly; SCHD’s climbed roughly fivefold since 2011
- SPHD’s expense ratio is 0.30%; SCHD’s is 0.06%
When looking at these funds, it pays to examine what the portfolio holds rather than resting on the headline yield alone. A large dividend now is pleasant, yet a growing dividend over time carries more weight. A low fee also counts for more than most people assume.
It is strange how this decade produced two funds with identical marketing pitches that wound up as nearly opposite results. One fund gave income. One gave growth. The investor who wanted both received neither.
Source material: “SPHD and SCHD Both Promise High Dividends, Yet One Has Barely Made Investors Any Money in a Decade,” Yahoo Finance.
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