Which Is the Better Dividend ETF: Schwab's Defensive SCHD or Fidelity's Tech-Tilted FDVV?

The Motley Fool recently compared two dividend-focused exchange-traded funds (ETFs): Schwab U.S. Dividend Equity ETF (SCHD) and Fidelity High Dividend ETF (FDVV). SCHD follows a more conservative, low-cost approach, while FDVV takes a growth-oriented stance tilted towards technology and financial services. Both target high-quality companies paying dividends, but differ significantly in sector exposure and costs.

SCHD boasts a lower expense ratio of 0.06% versus FDVV's 0.15%, while paying a higher dividend yield of 3.1% compared to FDVV's 2.7%. SCHD's portfolio is weighted towards defensive sectors like healthcare (21%), consumer defensive (20%), and energy (15%). Key holdings include Abbott Labs, Amgen, and Merck. With 103 stocks, SCHD has none of the structural quirks.

In contrast, FDVV leans heavily into tech with 29% exposure, financial services at 19%, and consumer cyclical at 13%. Top holdings are Nvidia, Apple, and Microsoft. This aggressive strategy may yield higher long-term returns but typically involves greater volatility, as reflected in its higher beta. FDVV was launched in 2016 and has paid $1.73 per share over the past year, translating to a 2.7% yield.

For income-focused investors prioritizing cost efficiency and a stable dividend foundation, SCHD appears to be the superior choice. FDVV, while offering stronger long-term total returns, caters to investors comfortable with higher risk and tech exposure. Despite being an attractive option, SCHD was not included in The Motley Fool's latest top 10 growth stocks list.