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VYM: I’m Downgrading Vanguard’s High Dividend ETF—Because SCHD Now Offers Better Value

TL;DR

Both VYM (Vanguard High Dividend Yield ETF) and SCHD (Schwab U.S. Dividend Equity ETF) are excellent dividend vehicles with similar fees. But as of late August 2025, SCHD offers a higher current SEC yield, a tighter, quality-screened portfolio, and has delivered slightly better long-run total returns—all without a fee advantage for VYM to compensate. I’m downgrading VYM from a core holding to Hold/Underweight, and I’m upgrading SCHD to my preferred large-cap U.S. dividend ETF for new money. (Data and dates throughout noted explicitly; citations follow each load-bearing claim.)


Price snapshot: VYM


Price snapshot: SCHD

What Changed—and Why the Call Today

In dividend investing, the edge comes from:

  1. What you own (index methodology and factor tilts),

  2. What you pay (fees), and

  3. What you earn (current yield and the durability of dividend growth).

On those three, SCHD now looks better:

  • Income, today: As of August 28, 2025, SCHD’s 30-day SEC yield is 3.74% (TTM distribution yield 3.87%, as of July 31). As of July 31, 2025, VYM’s 30-day SEC yield is 2.57% (and its stated dividend yield is 2.64%). That’s a meaningful spread in favor of SCHD. Schwab BrokerageVanguard

  • How they’re built: VYM tracks FTSE High Dividend Yield, a broad, cap-weighted screen of high-yielders that explicitly excludes REITs, focusing on stocks with above-average yields and minimal other constraints. SCHD tracks the Dow Jones U.S. Dividend 100—a ruleset that requires a long dividend payment history (10 years) and adds quality screens (e.g., profitability, cash flow to debt), then weights by a modified market-cap method. In short: VYM = wide net for yield; SCHD = yield and quality. Vanguard Fund DocumentsLSEGS&P GlobalETF Database

  • Performance, long-term: As of June 30, 2025, VYM’s 10-year annualized total return is 10.47%; SCHD’s 10-year is ~11.1% (NAV). The gap isn’t massive but it’s persistent—and you’re not paying extra to get it. Vanguard Fund DocumentsWall Street Schwab

Given equal expense ratios (0.06% each), there’s no cost-based reason to prefer VYM right now. Vanguard Fund DocumentsSchwab Brokerage

Cost & Liquidity: A Wash

  • Fees: Both funds list 0.06% expense ratios. With trading spreads tight for these mega-funds, cost is effectively a tie. Vanguard Fund DocumentsSchwab Brokerage

  • Scale & tradability: Each has deep assets and volume. (VYM’s fact sheet shows tens of billions in assets; SCHD’s sponsor pages and report card indicate similar scale.) For most investors, execution quality is comparable in normal markets. Vanguard Fund DocumentsWall Street Schwab

Methodology Drives Outcome

VYM: A Broad Net for Yield

  • Index: FTSE High Dividend Yield—derived from FTSE GEIS U.S., picks high-yielding stocks and excludes REITs; portfolio is essentially cap-weighted. This keeps turnover low and diversification high. Vanguard Fund DocumentsLSEG

  • What that means: VYM owns hundreds of names (currently ~582), spreading risk but also diluting the impact of any single quality screen. Sector weights naturally reflect where high yields reside at a given time. As of June 30, 2025, Financials (21.5%), Industrials (13.4%), Tech (12.3%), Health Care (12.1%), Consumer Staples (10.0%) and Energy (8.3%) drive the fund. Top-10 concentration ~25%, with Broadcom, JPMorgan, Exxon Mobil, Walmart, Procter & Gamble, and Johnson & Johnson prominent. Vanguard Fund Documents

SCHD: Yield, But Only If It’s Backed by Quality

  • Index: Dow Jones U.S. Dividend 100—requires 10 consecutive years of dividend payments, ranks on a composite of quality ratios (e.g., return on equity, cash flow to debt) and dividend yield, and then weights by a modified market cap (with caps). REITs/MLPs are excluded at the index level. S&P GlobalETF Database

  • What that means: SCHD is deliberately concentrated (about 100–103 holdings recently) in companies that screen well on quality + yield. As of June 30, 2025, sector tilts skew Energy (~19%), Consumer Staples (~19%), Health Care (~16%), Industrials (~13%), with Tech (~9%) and Financials (~9%) much lighter than many “dividend” peers. Top-10 concentration ~41%—meaning winners (and mistakes) matter more. Schwab Brokerage+1Wall Street Schwab

Bottom line: VYM = breadth; SCHD = selective quality. In the current market, SCHD’s higher vetted yield is exactly the kind of edge you want paid to wait.

Income Profile: Current Yield vs. Growth of Income

  • Current income: As of the latest readings, SCHD’s SEC yield (3.74%) > VYM’s (2.57%), creating an immediate income advantage before even considering growth. (Dates: SCHD 8/28/2025; VYM 7/31/2025.) Schwab BrokerageVanguard

  • Dividend durability & growth: SCHD’s index forces a 10-year dividend record and layers quality filters—a recipe designed to reduce the risk of cuts and improve dividend growth resilience across cycles. VYM’s screen is simple: favor higher current yielders (ex-REITs) with broad diversification, which doesn’t systematically prefer balance-sheet strength. In a world where funding costs still matter and growth is uneven, I’ll take systematic quality. S&P GlobalETF Database

Valuation, Concentration, and What You “Own”

  • Valuations: VYM’s fact sheet shows P/E ~19.8x and P/B ~2.9x as of June 30, 2025—reflecting its large-cap blend/value mix. SCHD’s precise valuation mix varies by quarter, but given its heavier tilt to Staples, Health Care, and Energy right now, it typically sits in value/defensive territory, not expensive growth. (When SCHD publishes updated valuation tables, they’ll track to those sector tilts.) Vanguard Fund DocumentsSchwab Brokerage

  • Concentration risk: SCHD’s top-10 ~41% (as of July 31, 2025). VYM’s top-10 ~25%. If you dislike single-name risk, VYM is the safer “sleep at night” choice; if you want a high-conviction dividend core, SCHD’s focus is the point, not a bug. Wall Street SchwabVanguard Fund Documents

  • Sector tilts: SCHD’s Energy (~19%) and Staples (~19%) weights reflect the fund’s preference for cash-rich companies returning capital now. VYM spreads the bet across Financials, Industrials, Tech, and Health Care, with more beta to a broad value cycle. Choose your poison: defensive income (SCHD) vs broad high-yield beta (VYM). Schwab BrokerageVanguard Fund Documents

Performance: Edge to SCHD (and the Fee Can’t Save VYM)

  • 10-Year: As of 6/30/2025, VYM’s 10-year annualized is 10.47%; SCHD’s is ~11.1% (NAV). That’s not a blowout, but it’s real—and with fees equal, VYM lacks a counterargument on cost. Vanguard Fund DocumentsWall Street Schwab

  • Behavior in different tapes: SCHD’s quality + yield tends to hold up better in profitability-led markets or when balance sheets are in focus. VYM’s breadth shines in broad value rallies where Financials/Industrials run—and can lag when quality is repriced upward.

Investor translation: If you’re buying a dividend core for the next five years, quality screens have earned their keep. If you’re timing a cyclical value spurt, VYM can be an efficient vehicle—but that’s a tactical call, not a long-term edge.

Where VYM Still Makes Sense

I’m not “anti-VYM”—I’m anti opportunity cost:

  • You prize breadth and lower concentration risk. With ~582 holdings and a ~25% top-10 weight, VYM smooths single-name risk better than SCHD. Vanguard Fund Documents

  • You want cap-weighted simplicity. VYM is the simplest, low-maintenance “own the U.S. high-yielders” wrapper—no factor tinkering beyond the main yield sort. Vanguard Fund Documents

  • You’re making a tactical value bet across Financials/Industrials while still collecting a market-level dividend.

If any of these define you, holding VYM is reasonable. But for a new dividend core, I now prefer SCHD.

Why SCHD Gets the Nod

  • Higher current yield today. Again, 3.74% vs. 2.57% SEC yield on the latest comparable dates. That income gap matters—especially in taxable accounts where you might not sell to “manufacture” yield elsewhere. Schwab BrokerageVanguard

  • Quality as a guardrail. The 10-year dividend record plus profitability/cash-flow screens is a time-tested way to reduce dividend impairment risk without giving up too much upside. S&P Global

  • Competitive long-term returns. SCHD’s 10-year edge—while modest—is consistent with its rules. Same fee, so the net benefit accrues to you. Wall Street Schwab

  • Know what you own. With ~100 names and meaningful top-10 weight, you can actually track drivers (e.g., Energy/Staples/Health Care leadership) and decide when to rebalance. Schwab Brokerage

Practical Portfolio Moves

If you already hold VYM (especially in a taxable account):

  • Don’t force a sale if you have large embedded gains. Consider new contributions to SCHD while maintaining VYM. Over time, you can rebalance with cash flows.

If you’re building a dividend core today:

  • Primary: SCHD as the core dividend sleeve.

  • Satellite: Add VYM tactically if you want broader spread across value sectors (especially if Financials/Industrials leadership is your macro view).

If you want more defense: Pair SCHD with a small Dividend Growth sleeve (e.g., a fund requiring multiyear dividend increases) to add a structural growth tilt. (Note: VYM excludes REITs; SCHD’s index excludes REITs and MLPs as well—hold a separate REIT sleeve if property income is part of your plan.) LSEGETF Database

Key Facts at a Glance (as of recent fund documents)

  • VYM

    • Expense ratio: 0.06%.

    • 30-day SEC yield: 2.57% (as of 7/31/2025).

    • Dividend yield (TTM): ~2.64% (as of 7/31/2025).

    • Holdings: ~582; Top-10 ~25%.

    • Sector mix (6/30/2025): Financials ~21.5%; Industrials ~13.4%; Tech ~12.3%; Health Care ~12.1%; Staples ~10.0%; Energy ~8.3%.

    • 10-yr annualized (to 6/30/2025): 10.47%. Vanguard Fund DocumentsVanguard

  • SCHD

    • Expense ratio: 0.06%.

    • 30-day SEC yield: 3.74% (as of 8/28/2025). TTM yield: 3.87% (as of 7/31/2025).

    • Holdings: ~103; Top-10 ~41%.

    • Sector mix (6/30/2025): Energy ~19.2%; Consumer Staples ~18.8%; Health Care ~15.5%; Industrials ~12.5%; Tech ~9.0%; Financials ~8.9%.

    • 10-yr annualized (to 6/30/2025): ~11.1% (NAV). Schwab Brokerage+3Schwab Brokerage+3Schwab Brokerage+3Wall Street Schwab

Risks & “Know-Thyselves”

  • Concentration (SCHD): If Energy or a couple of mega-Staples enter a drawdown, your income and price will feel it more than in VYM. That’s the tradeoff for the higher yield today. Schwab Brokerage

  • Breadth without quality (VYM): Owning more names can mean owning more mediocre balance sheets. In a credit-sensitive environment, a broad yield screen can be a mild headwind versus a quality overlay. Vanguard Fund Documents

  • Both exclude REITs: If you rely on real estate income, you’ll need a dedicated REIT fund—neither VYM nor SCHD gives you that exposure. LSEGETF Database

The Verdict

I’m downgrading VYM to Hold/Underweight. It remains a solid, low-cost high-yield wrapper—but it’s not the best value today. With no fee advantage, lower current SEC yield, and no quality overlay, VYM is less compelling at the margin than SCHD right now. Vanguard Fund DocumentsVanguard

I’m upgrading SCHD as my preferred core dividend ETF for fresh capital. You get a higher yield now, a quality-screened portfolio, and competitive long-term results—all for the same price tag. In a market still rewarding durable cash flows and balance-sheet strength, that’s the better bargain. Schwab BrokerageS&P GlobalWall Street Schwab

Not investment advice. Dividend yields and fund metrics change; always check the sponsor’s latest fact sheets before transacting.

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