Forget SCHD: This Fidelity Fund Has Beaten It by 5 Points a Year for Five Years
SCHD built its reputation on strict dividend screening, but that same rulebook quietly locked out the stocks that dominated the last five years. One Fidelity fund found a way around that constraint, and the performance gap it opened may change…
If you own Schwab U.S. Dividend Equity ETF (NYSEARCA:SCHD), you own it for a reason that still makes sense: a rules-based screen of quality U.S. dividend payers, a rock-bottom 0.06% expense ratio, and a yield near 3.2% that comfortably beats the S&P 500. SCHD has grown into a $94.9 billion juggernaut because its Dow Jones U.S. Dividend 100 methodology screens hard for payout durability. There is a competitor built on a different screen that has left SCHD roughly 5 percentage points behind per year over the last half-decade, and it deserves a look before your next contribution.
Why SCHD Lands Where It Does
The index behind this one rewards a decade of dividend payments, high cash-flow-to-debt, and return on equity. The result is a portfolio heavy in energy, consumer staples, and legacy pharma: top positions include QUALCOMM at 6.74%, Texas Instruments at 5.90%, UnitedHealth at 5.09%, Chevron at 3.83%, and Coca-Cola at 3.96%. That composition throws off reliable income (trailing 12-month distributions of $1.048 per share) but structurally excludes the mega-cap technology names that have driven index returns since 2020. NVIDIA, Microsoft, and Apple do not clear SCHD’s screen, and that omission is the entire story of the last five years.
Where the Gap Shows Up
Over the trailing five years, SCHD returned 57.53% on a total-return basis, or roughly 9.5% annualized. Fidelity High Dividend ETF (NYSEARCA:FDVV) returned 94.19% over the same span, or roughly 14.2% annualized. The ~5-point annualized gap is not a rounding artifact from picking a lucky start date; it reflects a methodology difference that let FDVV hold names SCHD was rules-bound to skip.
The screen for this one weights yield plus payout quality but keeps mega-cap technology in the eligible universe. As of April, its top holdings included NVIDIA at 6.84%, Apple at 5.69%, Microsoft at 4.49%, and Broadcom at 3.49%. Those four names alone make up 20.51% of the fund. That is the engine behind FDVV’s 5-point edge: the same dividend-quality wrapper, minus the rule that fenced off the market’s biggest compounders.
Address the Yield First
The current income is still higher on SCHD. Its yield near 3.2% beats FDVV’s roughly 2.8%, and the trailing 12-month distribution of $1.729 per share for FDVV confirms it. If you are drawing income today and total return is secondary, that 40-basis-point yield advantage is real money on a large position. The FDVV case is a total-return case: you accept a slightly lower yield and let capital appreciation from tech exposure do more of the work.
What You Give Up
The fee difference is the easy part. FDVV charges 0.15% versus SCHD’s 0.06%, so you’re paying about two and a half times as much. On a $100,000 position, that’s roughly $90 more per year, which is pretty easy to swallow if the return edge holds up at all.
The harder part is what’s happened this year. SCHD is up 23.36% year to date; FDVV is up 11.92%. Value stocks and defensive dividend payers have led the way in 2026 as mega-cap tech cooled off, and that kind of reversal is exactly what you’d expect from SCHD in any year when tech takes a breather. The long-run edge FDVV offers comes with drawdown seasons that SCHD simply doesn’t experience.
Making the Switch Without Breaking Something
In a tax-advantaged account, moving part of a SCHD position to FDVV is mechanically clean and captures the exposure difference without triggering gains. In a taxable account, an outright swap after five strong years likely realizes meaningful long-term capital gains; a better path is often directing new contributions to FDVV while leaving embedded gains alone. A blended allocation, say 60/40 SCHD/FDVV, keeps most of the current income while adding the mega-cap tech exposure SCHD structurally cannot.
What This Means for Your Position
The bottom line: SCHD is not broken, and its 2026 lead over FDVV proves the case for keeping some. But if the reason you own a dividend fund is total return with income as a bonus, FDVV’s $9.18 billion in assets, tech-inclusive screen, and 5-point annualized edge over the last five years earn a hard look. Evaluate it against your own tax situation and time horizon; the swap makes the most sense for long-horizon holders who can absorb the years FDVV lags.
Contact [email protected] for any questions or corrections.
David Beren has been a Flywheel Publishing contributor since 2022. Writing for 24/7 Wall St. since 2023, David loves to write about topics of all shapes and sizes. As a technology expert, David focuses heavily on consumer electronics brands, automobiles, and general technology. He has previously written for LifeWire, formerly About.com. As a part-time freelance writer, David’s “day job” has been working on and leading social media for multiple Fortune 100 brands. David loves the flexibility of this field and its ability to reach customers exactly where they like to spend their time. Additionally, David previously published his own blog, TmoNews.com, which reached 3 million readers in its first year. In addition to freelance and social media work, David loves to spend time with his family and children and relive the glory days of video game consoles by playing any retro game console he can get his hands on.
