Key Points
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The Vanguard Dividend Appreciation ETF is designed to increase your income over time.
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The Schwab U.S. Dividend Equity ETF focuses more on quality and high yield.
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Together, they create a simple dividend portfolio for generating years of passive income.
After largely being pushed to the side by investors during the multi-year tech and artificial intelligence (AI) rally, dividend stocks are making a comeback in 2026. With the U.S. economy looking uncertain and the Iran war adding another wild card to the mix, investors are starting to find comfort in more durable, defensive stocks that generate plenty of cash.
Folks looking to create sustainable passive income streams can take advantage of the cash flow those companies are generating. Exchange-traded funds (ETFs) with low yields can still provide dividend growth over time, but those with high yields can drive how much you actually earn.
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Let’s look at one of each. This pair of dividend ETFs below has a long history of paying and growing dividends, and they’re perfect if you want to set up a lifetime stream of passive income.
Calculator, roll of cash, and post-it note reading “Dividends.”
Image source: Getty Images.
Schwab U.S. Dividend Equity ETF
The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) might be the gold standard of dividend ETFs. This ETF targets stocks with a combination of strong balance sheet health, long dividend payment histories, and high yields. This ETF
By looking for companies delivering the best combination of high yield, balance sheet strength, and dividend growth, you end up with an elite portfolio of dividend stocks that can deliver for years to come. Currently, the ETF offers offers a 3.4% dividend yield.
Vanguard Dividend Appreciation ETF
The Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) is more of a pure dividend growth fund and looks for companies with 10-plus consecutive years of increasing their annual dividends.
This ETF is the most popular dividend growth ETF in the marketplace. Its strategy is simple: Target companies that have raised their annual dividend for at least 10 consecutive years. These are the companies that have already demonstrated a commitment to growing their dividends and should continue doing so for years to come.
As a result of this strategy, this ETF has a more modest dividend yield of 1.7%.
SCHD vs. VIG: Dividend ETF comparison
|
Metric |
SCHD |
VIG |
|---|---|---|
|
Expense ratio |
0.06% |
0.04% |
|
AUM |
$88B |
$99B |
|
Dividend yield |
3.4% |
1.7% |
|
10-year average annual return |
12.4% |
12.9% |
|
# holdings |
104 |
334 |
|
Top sectors |
Consumer staples (19%), healthcare (19%), energy (17%) |
Technology (23%), financials (21%), healthcare (18%) |
Data sources: Schwab, Vanguard.
You can see that the portfolio compositions of these two ETFs are very different. One focuses on pure dividend growth. The other focuses on quality and high yield. But both of them can deliver durable dividend income for decades. Not only are they built for it, they’ve demonstrated it for more than a decade already. Given their low overlap with each other, these funds pair well together for a more diversified long-term income stream.
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David Dierking has positions in Vanguard Dividend Appreciation ETF. The Motley Fool has positions in and recommends Vanguard Dividend Appreciation ETF. The Motley Fool has a disclosure policy.