For more than a decade, SCHD has reigned as the people’s champion of dividend ETFs. The fan favorite. The heavyweight. The one ETF retail investors would take into a burning building before checking if their spouse made it out. If you go online and declare you buy anything other than SCHD, you’ll be interrogated like you’re testifying before Congress.
But every dynasty faces a challenger.
Every Goliath eventually hears footsteps.
And in the world of dividend growth ETFs, there’s a new fund making noise:
TBG — the T. Rowe Price Dividend Growth ETF.
It’s got the pedigree.
It’s got the strategy.
It’s got the performance receipts.
And yes — it’s been beating SCHD.
Quietly. Consistently. Persistently.
Now the question is: why? And more importantly: is TBG the new king of dividend growth?
Let’s dive into the story of how one ETF broke into the upper ranks of dividend royalty — and whether it deserves a spot in your portfolio.
Chapter 1: The Dividend Landscape — Where SCHD Became a Legend
Before we explain why TBG stands out, we need to acknowledge the giant whose territory it’s entering.
SCHD didn’t become a cult icon by accident.
It became popular because:
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It owns quality companies
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It focuses on free cash flow and durability
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It screens out junk
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It has low turnover
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It has an ultra-low expense ratio
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It delivers consistently high dividend growth
In other words, it does what most ETFs claim to do… but actually does it.
And for 10+ years, SCHD crushed competitors who couldn’t keep up. It became the default recommendation for every YouTube finance channel and Reddit thread filled with 21-year-olds planning their retirement like they’re 65-year-old pension fund managers.
So for something to outperform SCHD — and do it across multiple years — it has to be good.
Not just good. Good enough to challenge a throne.
Enter the contender.
Chapter 2: What Is TBG — And Why Haven’t Most Investors Heard of It?
TBG is the T. Rowe Price Dividend Growth ETF, an actively managed portfolio run by a team with decades of dividend expertise.
Yes, actively managed.
A dirty word for some ETF purists.
But here’s the twist: TBG’s active strategy works because it doesn’t fall into the traps active managers usually fall into:
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No closet indexing
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No hyperactive trading
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No “let’s bet the house on cloud dental startups” speculation
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No doubling down on broken companies
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No churn for the sake of churn
Instead, TBG does something very old-school and shockingly rare in modern finance:
It focuses on buying high-quality companies with long runways for dividend growth, then letting compounding do the hard work.
That’s it.
No fireworks.
No acrobatics.
Just disciplined, methodical dividend compounding.
Chapter 3: The Strategy — Why TBG Wins by Not Trying to Be Clever
Let’s break down what makes TBG different:
1. The fund prioritizes companies early in their dividend growth cycle
SCHD leans into mature dividend payers. That’s great for income.
But not always for growth.
TBG takes a different approach:
It hunts companies that recently began growing dividends aggressively — companies with:
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Expanding free cash flow
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High reinvestment potential
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Lower payout ratios
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Multi-decade growth ahead
Instead of buying the dividend aristocrats of today, TBG tries to buy the aristocrats of tomorrow.
That’s a subtle but powerful distinction.
2. It purposely avoids high-yield traps
High yield is like a plate of gas station sushi — it looks tempting but is usually a warning sign.
TBG invests primarily in:
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Low to medium-yield companies
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With high reinvestment rates
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Backed by strong management
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With sustainable margins
This gives TBG something SCHD doesn’t always have:
Accelerating dividend growth rates.
3. It tilts toward innovation-driven sectors
SCHD’s rules make it heavily tilted toward:
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Industrials
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Financials
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Consumer staples
Solid, dependable, durable — but not always fast-growing.
TBG includes more:
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Technology
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Healthcare
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Communications
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Long-term compounders that SCHD cannot include due to strict index rules
This gives TBG a faster engine.
4. It is free from rigid index methodology
SCHD must stick to its criteria no matter what.
TBG can pivot when:
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Valuations shift
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Growth slows
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Competitive dynamics change
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Companies stumble
Flexibility is an advantage when used responsibly.
TBG uses it responsibly.
Chapter 4: The Evidence — How TBG Actually Beats SCHD
This isn’t theory.
It’s not backtesting optimism.
It’s not speculative marketing.
TBG has been outperforming SCHD on:
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Total return
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Dividend growth (percentage basis)
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Risk-adjusted returns
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Long-term compounding rate
Across multiple timeframes.
Why?
Because while SCHD leans into defensive, durable dividend payers, TBG leans into companies still expanding — still hungry — still growing.
The difference between SCHD and TBG is the difference between:
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A veteran marathon runner (SCHD)
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A 28-year-old athlete entering their prime (TBG)
Both strong.
But only one is accelerating.
Chapter 5: What’s Inside — TBG’s Portfolio vs. SCHD’s
Let’s compare typical holdings (exact holdings change over time):
SCHD tends to hold:
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Pepsi
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Verizon
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Pfizer
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Cisco
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3M
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Amgen
These are durable, stable companies — but some have flat revenue growth, saturated markets, or cyclical challenges.
TBG holds more of:
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Microsoft
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Apple
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UnitedHealth
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Linde
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Broadcom
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S&P Global
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Thermo Fisher
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Danaher
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Visa
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Mastercard
These are:
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High-quality
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High-margin
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Recurring revenue
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Huge free cash flow machines
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Dividend growers
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Long-term expanders
TBG has more exposure to secular growth.
SCHD has more exposure to mature value.
This is the key philosophical difference.
Chapter 6: The Dividend Philosophy That Makes TBG Shine
Most dividend investors fall into two categories:
Category 1: The High-Yield Crowd
They want income right now.
They chase yield like a dog chasing a car tire.
They often end up with:
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REIT traps
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MLP traps
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Telecom traps
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“This 10% yield is totally safe” traps
(Plot twist: it wasn’t safe.)
Category 2: The Dividend Growth Crowd
They want lower yield today for higher income later.
This is the Warren Buffett approach.
The compounding approach.
The “slow now, unstoppable later” approach.
TBG is built precisely for this second category.
SCHD has one foot in each camp — growth and yield.
TBG is all-in on growth.
Which is why TBG’s dividend growth rate can outpace SCHD’s by a wide margin.
This matters because:
A 10% annual dividend growth rate doubles your income every seven years.
A 5% growth rate doubles every fourteen.
Time is money.
Literally.
Chapter 7: The Expense Ratio Debate — Why TBG Still Wins
SCHD fans are loyal. And respectably so.
But when confronted with TBG, they usually fall back on one argument:
“But SCHD’s expense ratio is nearly free.”
Correct. SCHD is a cost champion.
But here’s the adult truth about investing:
A slightly higher fee is irrelevant when performance is meaningfully better.
If TBG outperforms by even 1% annually after fees, it crushes SCHD over the long term.
People obsessed with expense ratios often forget that returns matter more than costs.
Paying 0.50% for outperformance beats paying 0.06% to underperform.
This is where active management earns its keep — when it adds real value.
Chapter 8: Risk — Does TBG Take on More?
Yes.
But intelligently.
TBG’s focus on growth means it ventures into faster-growing companies that carry:
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More valuation risk
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More volatility
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More reinvestment needs
But these companies also have:
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Higher margins
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Stronger competitive moats
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Better pricing power
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Superior long-term earnings potential
In exchange for slightly higher volatility, TBG gets:
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Higher long-term returns
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Higher dividend growth
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Higher reinvestment efficacy
It’s like choosing between:
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A steady cruiser ship
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A high-performance yacht with a great captain
Both get you across the ocean.
Just one gets there faster.
Chapter 9: Who Should Choose TBG Over SCHD?
TBG is perfect for investors who:
1. Want long-term dividend growth, not maximum yield
If your goal is:
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Income later
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Higher compounding
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Legacy wealth
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Multi-decade runway
TBG fits beautifully.
2. Prefer dividend-growth companies with strong reinvestment rates
Think:
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Tech
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Healthcare
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Quality industrials
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Specialty financials
Not legacy sectors with limited growth.
3. Are building a portfolio for retirement 10+ years away
TBG shines with time.
4. Want a “next generation aristocrat” fund
If SCHD holds the dividend aristocrats of yesterday, TBG tries to hold those of tomorrow.
5. Don’t mind paying for good management
If performance matters more than rock-bottom fees, TBG is a strong contender.
Chapter 10: Who Might Prefer SCHD?
To be fair, SCHD is still a beast.
Choose SCHD if you:
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Want higher yield sooner
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Want a lower fee
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Want a more defensive, value-oriented portfolio
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Prefer rules-based indexing over active management
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Want the stability of more mature companies
SCHD is the workhorse.
TBG is the racehorse.
Chapter 11: TBG in a Retirement Portfolio — The Long Game
Here’s where TBG really earns its place: long-term income potential.
Because TBG owns companies with high dividend growth DNA, it’s likely that:
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Today’s 1%–2% yields
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Become 4%–6% yields
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Which become 10%+ yields on cost
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Over a 20–30 year horizon
That’s how wealth is built through dividends.
Slowly.
Quietly.
Exponentially.
If SCHD gives you a paycheck today, TBG gives you a larger paycheck later.
Both are valid.
But the math of compounding strongly favors TBG over longer horizons.
Chapter 12: TBG in Down Markets — The Surprising Resilience
You’d think a growth-oriented dividend fund would crumble in downturns.
Not TBG.
Why?
Because TBG does not chase speculative tech — it invests in cash-flowing giants like:
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Microsoft
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Apple
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Broadcom
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Visa
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S&P Global
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UnitedHealth
Companies whose revenue does not disappear in a recession.
Companies with:
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Subscription models
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Mission-critical services
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Recurring revenue
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High margins
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Pricing power
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Loyal customers
This gives TBG a surprisingly defensive profile despite its growth tilt.
Chapter 13: The Real Secret — TBG Selects Companies SCHD Cannot
This may be the biggest advantage TBG holds.
SCHD’s rules force it to:
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Exclude companies without long dividend histories
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Exclude companies with lower yields
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Exclude companies with certain financial profiles
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Stick rigidly to its index criteria
TBG has no such restrictions.
It can buy:
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Early-stage dividend growers
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Tech innovators
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Healthcare disruptors
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High-quality compounders with lower initial yields
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Companies just beginning their dividend journey
SCHD buys the past.
TBG buys the future.
One is not better than the other.
They’re just different philosophies.
Chapter 14: The 20-Year Outlook — Where TBG Could Leave SCHD Behind
If TBG continues:
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growing dividends faster
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outperforming on total return
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maintaining lower turnover than most active funds
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investing in sectors poised for multi-decade expansion
Then the long-term compounding story becomes obvious.
Total return compounds.
Dividend growth compounds.
Quality compounds.
SCHD has run an incredible race — but its portfolio is aging.
Its companies are aging.
Its sectors are mature.
TBG, meanwhile, is positioned exactly where the economic wind is blowing:
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digital transformation
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cloud computing
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healthcare innovation
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financial infrastructure
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automation
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AI
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recurring revenue
The engine of the modern economy.
That’s where dividend growth lives now.
Chapter 15: The Bottom Line — TBG Isn’t Just Beating SCHD. It’s Built Differently.
This isn’t a story about SCHD being bad.
It’s a story about TBG being excellent — and different.
SCHD is:
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dependable
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mature
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defensive
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high yield
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low cost
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index-driven
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consistent
TBG is:
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growth-focused
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innovative
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flexible
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future-oriented
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high-quality
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dividend-accelerating
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long-term optimized
TBG isn’t trying to be SCHD.
It’s carving out its own lane.
And that lane, so far, leads to better performance.
If you want stability and income today — SCHD is unbeatable.
If you want higher income later and faster total return — TBG may be your new favorite ETF.