The Bottom Line on Dividend ETFs: Why SCHD Wins on Efficiency and Income

Comparing ProShares-S&P 500 Dividend Aristocrats® ETF (NOBL +1.76%) and Schwab U.S. Dividend Equity ETF (SCHD +1.57%) reveals distinct approaches to income, with the former prioritizing long-term payout consistency and the latter focusing on high-quality yield.

Investors seeking reliable income often gravitate toward these two funds. While both emphasize dividend-paying companies, they use different screens; NOBL tracks companies with decades of consecutive dividend increases, whereas SCHD filters for fundamental strength and sustainable payouts at a significantly lower cost.

The Schwab fund is notably more affordable, sporting an expense ratio of 0.06% compared to 0.35% for the ProShares fund. Additionally, the Schwab fund offers a higher payout with a more substantial trailing dividend yield.

ProShares-S&P 500 Dividend Aristocrats® ETF concentrates on companies that have increased dividends for at least 25 consecutive years. It holds 71 positions, led by Consumer Defensive at 23%, Industrials at 20%, and Financial Services at 13%. Its largest positions include Becton, Dickinson And Co (BDX +2.06%) at 1.81%, FactSet Research Systems (FDS +5.09%) at 1.76%, and Automatic Data Processing (ADP +3.46%) at 1.68%. The fund was launched in 2013. ProShares-S&P 500 Dividend Aristocrats® ETF has paid $1.17 per share over the trailing 12 months, which, on its recent ~$56.86 share price, works out to a 2.1% yield.

Schwab U.S. Dividend Equity ETF tracks the Dow Jones U.S. Dividend 100 Index, screening for financial strength and yield sustainability. It holds 102 stocks, concentrated in Consumer Defensive (20%), Healthcare (19%), and Technology (16%). Its top holdings include Texas Instruments (TXN -1.92%) at 4.54%, Procter & Gamble (PG +6.24%) at 4.37%, and Chevron (CVX -0.51%) at 4.32%. The fund was launched in 2011. Schwab U.S. Dividend Equity ETF has paid $1.05 per share over the trailing 12 months, which, on its recent ~$34.10 share price, works out to a 3.1% yield.

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When comparing the ProShares-S&P 500 Dividend Aristocrats® ETF (NOBL) and the Schwab U.S. Dividend Equity ETF (SCHD), investors should consider several key factors. Let's see what they tell us about each fund.

First, we should examine each fund's strategy. NOBL focuses on companies that have raised their dividends for at least 25 years running. The fund holds about 70 stocks and is equally weighted. SCHD, on the other hand, screens for stocks with high dividend yields and strong fundamentals. It holds about 100 stocks.

Two other important factors are historical performance and income potential. Over the last five years, SCHD has delivered a better overall performance. SCHD has generated a total return of 60%, equating to a compound annual growth rate of 9.8%. NOBL, by contrast, has delivered a total return of 38%, with a 6.6% CAGR. As for income potential, SCHD's 3.1% dividend yield tops NOBL's 2.1% dividend yield.

One final factor to weigh is cost. Once again, SCHD has an edge. It has an expense ratio of 0.06%, while NOBL's is 0.35%. To put that in context, if a person were to buy $10,000 of each ETF, they should expect to pay $6 in annual fees for their SCHD shares but $35 in annual fees for their NOBL shares.In summary, NOBL and SCHD are both ETFs focused on dividend stocks, yet there are big differences between them. For most income-oriented or cost-conscious investors, SCHD is the clear choice. Its lower fees and higher dividend yield give it a leg up on NOBL.