Total market growth or dividend income? This is the most important portfolio decision many investors face. Here is how VOO and SCHD stack up across every metric.
Vanguard S&P 500 ETF
Schwab U.S. Dividend Equity ETF
Over the past decade, VOO has outperformed SCHD on total returns due to the massive tech rally. But the gap narrows significantly when you focus on income generation and risk-adjusted returns.
| Metric | VOO | SCHD | Winner |
|---|---|---|---|
| 1-Year Total Return | 12.4% | 8.2% | VOO |
| 5-Year Total Return | 13.8% | 11.5% | VOO |
| 10-Year Total Return | 12.5% | 11.1% | VOO |
| Current Dividend Yield | 1.30% | 3.45% | SCHD |
| 5-Year Dividend Growth | 6.2% | 12.1% | SCHD |
| Expense Ratio | 0.03% | 0.06% | VOO |
| Max Drawdown (5yr) | -25.4% | -19.8% | SCHD |
| Sharpe Ratio (5yr) | 0.68 | 0.72 | SCHD |
| Beta | 1.00 | 0.82 | SCHD |
Important Context: VOO's outperformance has been heavily driven by mega-cap tech stocks (Apple, Microsoft, NVIDIA, etc.) that do not meet SCHD's dividend quality criteria. If tech underperforms going forward, the return gap could narrow or even reverse.
This is where the VOO vs SCHD debate gets interesting. While VOO wins on total returns, SCHD generates dramatically more income -- and the gap widens every year.
| Year | VOO Income | SCHD Income | SCHD Advantage |
|---|---|---|---|
| Year 1 | $1,300 | $3,450 | +$2,150 |
| Year 5 | $1,740 | $6,110 | +$4,370 |
| Year 10 | $2,330 | $10,830 | +$8,500 |
| Year 15 | $3,120 | $19,200 | +$16,080 |
| Year 20 | $4,180 | $34,050 | +$29,870 |
Assumes 6.2% annual dividend growth for VOO and 12.1% for SCHD, with dividends reinvested. Projections are illustrative.
After 20 years, SCHD could generate over 8x the annual income of VOO from the same initial investment. This is the power of starting with a higher yield and compounding it with faster dividend growth. For anyone planning to live off their portfolio income, this difference is life-changing.
Get our free Dividend Investing Starter Kit + weekly tips delivered to your inbox
Join 2,500+ dividend investors. Unsubscribe anytime.
The sector differences between VOO and SCHD explain their performance gap and highlight the different bets you are making with each fund.
| Sector | VOO | SCHD | Difference |
|---|---|---|---|
| Technology | 31.2% | 11.7% | -19.5% |
| Financials | 13.1% | 18.2% | +5.1% |
| Healthcare | 12.4% | 15.8% | +3.4% |
| Consumer Staples | 5.8% | 13.4% | +7.6% |
| Energy | 3.6% | 10.5% | +6.9% |
| Consumer Disc. | 10.5% | 7.8% | -2.7% |
| Industrials | 8.2% | 12.1% | +3.9% |
| Telecom | 8.8% | 6.3% | -2.5% |
VOO is essentially a 31% bet on technology, while SCHD is a more balanced value-oriented approach. When tech leads the market (as it has since 2010), VOO wins. When value sectors outperform (as they did in 2022), SCHD pulls ahead.
Many investors make the mistake of thinking they must choose one. In reality, a VOO + SCHD combination can be extremely effective.
70% VOO / 30% SCHD
Maximize total return while building a dividend base
50% VOO / 50% SCHD
Balance growth and income as retirement approaches
30% VOO / 70% SCHD
Prioritize income while maintaining some growth
VOO's lower 1.3% yield means less taxable income distributed each year. More of your return comes from unrealized capital gains, which you control when to realize. SCHD's 3.45% yield generates more mandatory tax events.
Nearly all dividends from both VOO and SCHD qualify for the lower long-term capital gains tax rate (0%, 15%, or 20% depending on your income bracket), rather than being taxed as ordinary income.
Consider holding SCHD in tax-advantaged accounts (IRA, 401k) where dividend taxes are deferred or eliminated, and VOO in taxable accounts where its lower yield creates fewer tax events.
It depends on your goals. If you are focused on maximum long-term total returns and do not need current income, VOO is likely better. If you want growing passive income or are approaching retirement, SCHD is the stronger choice. Many investors benefit from holding both.
Absolutely. VOO and SCHD have only about 30% overlap in holdings, so they complement each other well. VOO provides growth through tech exposure while SCHD provides income and defensive quality. A 50/50 split is a common starting point.
SCHD has historically fallen less during market downturns. During the 2022 bear market, SCHD declined about 5% less than VOO. Its quality-focused, dividend-paying companies tend to hold up better because they have stronger balance sheets and more predictable cash flows.
SCHD is arguably the better Roth IRA holding because its higher dividend yield benefits most from tax-free growth. All that dividend income compounds without ever being taxed. VOO is better suited for taxable accounts where its lower yield creates fewer annual tax events.
It already has in some periods. In 2022, SCHD outperformed VOO by about 13 percentage points. Over full market cycles that include value rotations, SCHD can match or beat VOO. The key variable is whether tech continues to dominate or the market broadens.