For investors aiming to secure regular dividend income without the need to directly evaluate and select individual stocks, exchange-traded funds (ETFs) targeting dividend-paying U.S. equities represent practical options. Among these, two prominent ETFs stand out: the Schwab U.S. Dividend Equity ETF (SCHD) and the ProShares S&P 500 Dividend Aristocrats ETF (NOBL). Both provide relatively straightforward access to dividend-focused stocks, yet their different strategies and portfolio compositions result in notable variances in cost structures, dividend yields, sector allocations, and historical performance.
Examining the expense ratios reveals SCHD as the more economical choice, charging a modest 0.06% of assets annually compared to NOBL’s 0.35%. This substantial difference means that investors allocating $100 to SCHD incur an annual fee of just six cents, whereas the same investment in NOBL results in fees of 35 cents, illustrating how expense ratios can materially affect long-term returns.
Dividend yield is another critical criterion for income-focused investors. SCHD currently offers a dividend yield of approximately 3.8%, which is significantly higher than NOBL’s 2.2%, and also considerably exceeds the yield of the broader S&P 500 index, which stands at about 1.2%. Such a yield can attract investors prioritizing steady income streams.
Both funds adopt distinct underlying indices that shape their portfolio construction and sector emphasis. SCHD tracks the Dow Jones U.S. Dividend 100 Index, emphasizing a selection of 102 large-cap U.S. companies known for sustainable and relatively high dividend payment records. This index tilts toward sectors such as energy (19.3%), consumer staples (18.5%), and healthcare (16.1%), collectively accounting for a large portion of the portfolio. Leading holdings include prominent companies such as Bristol Myers Squibb, Merck & Co., and ConocoPhillips. SCHD’s longevity—with a 14.2-year performance history—affords investors a degree of confidence in its consistency and approach.
Conversely, NOBL’s investment universe comprises 70 S&P 500 firms designated as Dividend Aristocrats. These are companies distinguished by having increased their dividends for at least 25 consecutive years, reflecting a stringent quality and growth criterion over mere yield. NOBL’s portfolio leans more heavily into industrials (22.4%), consumer defensive (22%), and financial services (12.4%). Notable holdings within NOBL include Albemarle, Cardinal Health, and C.H. Robinson Worldwide, reflecting its systematic selection of dividend growth leaders.
From a risk perspective, both ETFs exhibit similar characteristics. Their five-year maximum drawdowns stand close, with SCHD experiencing a 16.82% peak-to-trough decline and NOBL recording a 17.91% drawdown during the same period. Growth of an initial $1,000 investment over five years also shows near parity, with SCHD appreciating to approximately $1,298 and NOBL slightly higher at $1,308. Beta measurements, reflecting sensitivity to market fluctuations over five years, reinforce their comparable volatility profiles in relation to the S&P 500.
It is important to note that neither fund employs leverage or complex structural mechanisms, which can be sources of additional risk. Instead, their divergence lies predominantly in sector composition and index methodology, elements that may influence performance outcomes over extended investment horizons.
For investors deciding between SCHD and NOBL, the key consideration revolves around investment objectives. SCHD's larger asset base of roughly $72.5 billion and its focus on higher dividend yields make it especially appealing for income-oriented investors seeking current payout levels. In contrast, NOBL’s strategy centers on dividend growth stability, rewarding investors who value companies with a proven track record of increasing dividends annually, suggesting a safer dividend growth outlook though with lower immediate yield.
Ultimately, both ETFs offer exposure to fundamentally strong companies demonstrating disciplined dividend policies. SCHD’s appeal lies in its low cost and superior dividend yield, traits that have contributed to its long-term outperformance relative to NOBL. Meanwhile, NOBL's stringent criteria for dividend growth foster an investment approach centered on dividend safety and consistency rather than yield magnitude.
Investors should thus weigh their preference for immediate income versus dividend growth potential, factoring in costs and sector exposures to align with their financial goals. Such evaluation is crucial to selecting the fund that best supports an investor’s income strategy and risk tolerance profile.