Quick Read
-
Schwab US Dividend Equity ETF (SCHD) is down 2% year-to-date and trails the S&P 500 by nearly 18%.
-
Fidelity High Dividend ETF (FDVV) is up 12% year-to-date and yields 3.09%.
-
Avantis International Small Cap Value ETF (AVDV) surged 37.3% year-to-date on international small-cap exposure.
-
Some investors get rich while others struggle because they never learned there are two completely different strategies to building wealth. Don’t make the same mistake, learn about both here.
The Schwab US Dividend Equity ETF (NYSEARCA:SCHD) was often seen as the gold standard among dividend exchange-traded funds. Today, Fidelity High Dividend ETF (NYSEARCA:FDVV), Amplify CWP Enhanced Dividend Income ETF (NYSEARCA:DIVO), and Avantis International Small Cap Value ETF (NYSEARCA:AVDV) are worth looking into instead. SCHD used to give you a yield comfortably ahead of inflation, and it kept roughly on par with the S&P 500 if you kept reinvesting the dividends.
The past few years have been rather rough for this ETF. It has deviated from its earlier trajectory and is actually down 2% year-to-date. SCHD is only a hair above zero when you take dividends into account, and it is an embarrassingly low return compared to its competitors. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) has a lead of almost 18% year-to-date over the SCHD. I wouldn’t toss out this YTD figure as a one-off. SCHD is still down compared to late-2021 prices.
The “moving parts” of this ETF need to cooperate for SCHD to recover, and there aren’t any clear signs of its components mounting a recovery soon.
Thus, I’d diversify into the following alternatives.
Fidelity High Dividend ETF (FDVV)
The Fidelity High Dividend ETF is a low-cost exchange-traded fund that passively tracks the Fidelity High Dividend Index. You get exposure to a portfolio of large-cap and mid-cap companies that are chosen for their ability to pay and keep raising above-average dividends.
The ETF starts with the 1,000 largest U.S. and developed international stocks by market cap and then caps international exposure at 10%. It screens companies within each sector and prioritizes higher yields with sustainable payout ratios and high growth. After screening out ineligible picks, the ETF has 121 holdings.
This methodology has led to FDVV being one of the best all-around ETFs if you are looking for a handsome yield and decent upside potential. FDVV is up almost 12% year-to-date. It yields 3.09% and has an expense ratio of 0.16%, or $16 per $10,000.
FDVV is up 86.56% in the past five years, minus dividends. Those who’ve held the ETF and reinvested the dividends are now well ahead of the SPY.
Amplify CWP Enhanced Dividend Income ETF (DIVO)
The Amplify CWP Enhanced Dividend Income ETF is managed actively and is more concentrated than SCHD or FDVV. However, it is a very competitive ETF that has managed to trounce SCHD’s gains. It has 36 holdings, and almost all of them are considered blue-chip U.S. stocks.
The top holding is American Express (NYSE:AXP) with a 5.42% weight, followed by RTX Corp (NYSE:RTX) and Apple (NASDAQ:AAPL) at 5.4% and 5.18%, respectively.
But one would assume that an ETF that invests heavily into these blue-chip stocks is unlikely to yield much. RTX yields 1.54%, AXP yields 0.89%, and AAPL yields just 0.39%. The trick here is that DIVO uses a tactical covered-call overlay, where the sub-advisor opportunistically sells short-dated call options on individual holdings to harvest option premiums rather than keeping every position continuously overwritten.
DIVO is thus a sensible middle-ground for investors who don’t want to chase risky double-digit yields, but still want to dabble in amplified yields through options.
Better yet, it pays monthly.
DIVO yields 4.53% and has an expense ratio of 0.56%, or $56 per $10,000.
Avantis International Small Cap Value ETF (AVDV)
The Avantis International Small Cap Value ETF (NYSEARCA:AVDV) is also actively managed, and it gives investors diversified exposure to small-cap stocks in developed markets outside the U.S. International stocks have fallen behind their U.S. counterparts in the past few years. Plus, you may have also noticed that small-cap stocks have done significantly worse compared to big-cap giants.
But this can also be an advantage when the pendulum swings the other way. U.S. stocks are now expensive, and these international small-cap stocks have lots of room to catch up. The U.S. dollar has finally been sliding after surpassing even the Euro at one point. On top of that, most other countries are now cutting their interest rates, and this is boosting their small-cap stocks.
The performance speaks for itself, as AVDV is up 37.3% year-to-date.
It’s a great hedge against tariffs, too, considering companies that don’t do as much business with the U.S. are well-insulated. Smaller companies internationally are likely to keep within their borders.
Simply put, it’s a great ETF to own to diversify. The only drawback is that the yield is just 1.7%. AVDV makes up for it with a low expense ratio of 0.25%, or $25 per $10,000.