Two Dividend ETFs Quietly Beating SCHD on Total Return Since 2022
Source Entity
Yahoo Finance
While the Schwab U.S. Dividend Equity ETF (SCHD) remains a popular choice, the Fidelity High Dividend ETF (FDVV) and CGDV have delivered superior total returns since early 2022. This outperformance is largely attributed to their inclusion of faster-growing technology stocks and a focus on dividend growth over headline yield.
Analyzing the Shift in Dividend ETF Performance: SCHD vs. The Challengers
For years, the Schwab U.S. Dividend Equity ETF (SCHD) has been regarded as a benchmark for income-focused investors, prized for its disciplined approach and exceptionally low expense ratio of 0.06%. However, recent market dynamics have highlighted a critical distinction in dividend investing: the difference between chasing a high 'headline yield' and pursuing 'total return.' Data indicates that while SCHD remains a strong contender, two other funds—the Fidelity High Dividend ETF (FDVV) and CGDV—have emerged as 'all-weather' alternatives that have outperformed SCHD since the beginning of 2022.
The Total Return Divergence
According to performance data from testfolio, over a 4.35-year window stretching from February 2022 through July 2, 2026, SCHD delivered a cumulative total return of 52.21%. While this figure represents solid growth, it was surpassed by FDVV and CGDV. This trend underscores a pivotal lesson for investors: a slightly lower initial dividend yield can often lead to stronger long-term results if the fund is paired with superior capital appreciation. The focus shifts from how much a stock pays today to how much the overall investment grows over time.
The Technology Catalyst
One of the primary drivers behind the outperformance of FDVV and CGDV is their sector allocation, specifically regarding the technology sector. SCHD tends to underweight faster-growing tech companies in favor of more traditional value plays. In contrast, FDVV and CGDV have benefited significantly from owning technology firms that maintain dividend payments while experiencing rapid growth. In a market increasingly driven by digital transformation and AI, this exposure has allowed these funds to capture capital gains that SCHD's more conservative screening process largely missed.
Strategic Indexing: Growth vs. Yield
The success of the Fidelity High Dividend ETF (FDVV) can be attributed to its proprietary benchmark, the Fidelity High Dividend Index. Unlike funds that simply screen for the highest current yields—which can sometimes lead to 'yield traps' where high payouts signal company distress—FDVV emphasizes companies that are expected to continue paying and growing their dividends. This forward-looking approach ensures that the portfolio is composed of fundamentally healthy companies with the capacity for sustainable growth, rather than those simply offering high short-term payouts.
Evaluating the Cost-Performance Trade-off
From a cost perspective, SCHD remains the most economical option with its minimal expense ratio. However, the performance of FDVV and CGDV suggests that fees are not the sole determinant of success. Both funds have historically earned back their higher expense ratios through stronger overall performance. This indicates that for the sophisticated investor, paying a slightly higher management fee is a justifiable trade-off if the fund's strategy generates enough 'alpha' (excess return) to more than offset the cost.
Conclusion: A New Paradigm for Income Investors
In summary, the recent performance gap between SCHD and its competitors highlights a broader trend in the equity markets where growth and dividends are no longer mutually exclusive. By prioritizing dividend growth and maintaining exposure to the technology sector, FDVV and CGDV have proven to be more resilient and productive in a modern market environment. For investors, the takeaway is clear: prioritizing total return over headline yield is the most effective strategy for long-term wealth accumulation.