The Schwab U.S. Dividend Equity ETF (SCHD) is a foundational asset for many income-focused investors, valued for its stability and low costs. However, for those seeking monthly income and potentially greater long-term growth, other exchange-traded funds present compelling alternatives.
An analysis of the dividend landscape reveals at least two ETFs that not only provide monthly payouts but have also historically outperformed SCHD in total returns. These funds employ different strategies, one focusing on enhanced income through options and the other on quality growth, offering distinct advantages for different investor goals.
Key Takeaways
- The Schwab U.S. Dividend Equity ETF (SCHD) is a popular choice for its low cost and reliable quarterly dividends but has recently lagged in performance.
- The Amplify CWP Enhanced Dividend Income ETF (DIVO) offers a higher monthly yield by combining dividend stocks with a covered call strategy.
- The WisdomTree U.S. Quality Dividend Growth Fund (DGRW) prioritizes total return by focusing on high-quality growth companies and also pays monthly.
- Both DIVO and DGRW have delivered higher annualized returns than SCHD over the past five to ten years, making them strong alternatives for growth and income investors.
The Standard Bearer: Why Investors Trust SCHD
For years, the Schwab U.S. Dividend Equity ETF (SCHD) has been a go-to for investors building a dividend-oriented portfolio. It tracks the Dow Jones U.S. Dividend 100 Index, which includes high-quality companies with a history of consistent dividend growth and strong financial health. This strategy has proven effective over the long term.
Over the last decade, SCHD has generated an impressive 12.2% annualized return, resulting in a cumulative growth of approximately 217%. Its appeal is further enhanced by an extremely low expense ratio of just 0.06%, making it one of the most cost-efficient options available.
However, the fund has shown some limitations. Its dividend is paid quarterly, which may not be ideal for investors seeking more frequent cash flow. Furthermore, its performance has been modest recently, with a year-to-date gain of only 2.8% in a market largely driven by technology stocks.
What is an ETF?
An Exchange-Traded Fund (ETF) is a type of investment fund that is traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, bonds, or commodities. Dividend ETFs specifically focus on holding stocks of companies that pay regular dividends to their shareholders.
DIVO: Generating Enhanced Monthly Income
For investors prioritizing a steady, monthly income stream, the Amplify CWP Enhanced Dividend Income ETF (DIVO) offers a unique and actively managed approach. DIVO combines a portfolio of high-quality, large-cap dividend stocks with a tactical covered call strategy to boost its income generation.
The fund holds a concentrated portfolio of 20 to 30 well-known S&P 500 companies, including giants like Microsoft and JPMorgan Chase. The active management team selectively writes covered call options on some of these holdings to generate additional premium income, which is then passed on to investors.
This hybrid strategy results in a robust trailing 12-month dividend yield of 4.5%, paid monthly. This is significantly higher than SCHD's 3.8% quarterly yield. The monthly payout schedule is particularly attractive for retirees or anyone looking to supplement their regular income.
Performance Comparison: DIVO vs. SCHD
- 5-Year Annualized Return: DIVO has returned 13.4%, while SCHD has returned 12%.
- Year-to-Date Performance (2025): DIVO is up 14.2%, significantly outpacing SCHD's 2.8% gain.
- Total Annualized Return (since 2016): DIVO has a slight edge with a 12.5% return.
The primary trade-off for this active management and higher yield is the expense ratio, which stands at 0.56%. While considerably higher than SCHD's 0.06%, the performance data suggests that for many, the cost has been justified by the superior income and returns, especially in varied market conditions.
"The covered call strategy not only boosts income but can also provide a cushion against market volatility, as the premiums collected can offset minor price declines in the underlying stocks."
DGRW: A Focus on Quality Growth and Total Return
Investors with a longer time horizon who value capital appreciation alongside their dividends may find the WisdomTree U.S. Quality Dividend Growth Fund (DGRW) to be a powerful alternative. DGRW’s strategy is built on identifying U.S. companies with strong fundamentals, such as high return on equity and consistent earnings growth.
Unlike many traditional dividend funds that have a strong value tilt, DGRW leans towards quality growth. Its top holdings include technology leaders like Microsoft, Apple, and Nvidia. This focus has allowed it to capitalize on market trends that have favored growth sectors.
The performance numbers speak for themselves. Over the past decade, DGRW has delivered a 14.3% annualized return, comfortably ahead of SCHD. The gap widens over the last three years, with DGRW posting a 20% annualized return compared to SCHD's 11%.
Performance Comparison: DGRW vs. SCHD
- 10-Year Annualized Return: DGRW has returned 14.3%, compared to 12.2% for SCHD.
- Year-to-Date Performance (2025): DGRW has gained 11.2%, while SCHD is up 2.8%.
- Dividend Yield: DGRW's yield is lower at 1.4%, reflecting its focus on total return rather than pure income.
While DGRW's 1.4% yield is lower than SCHD's, its total return—the combination of dividends and stock price appreciation—has been substantially higher. The fund also offers the benefit of monthly dividend payments, which allows for faster compounding through reinvestment. With an expense ratio of 0.28%, it offers a cost-effective blend of growth and income.
Building a Diversified Dividend Strategy
While SCHD remains a solid choice for its low cost and stability, it is not the only option for dividend investors. Both DIVO and DGRW offer compelling advantages that can complement or even replace a core holding in SCHD, depending on an investor's individual goals.
For those seeking maximum monthly income and stability, DIVO's actively managed, option-enhanced strategy is a strong contender. For those focused on long-term wealth accumulation, DGRW's quality growth approach has demonstrated a clear ability to deliver superior total returns.
A diversified approach could involve blending all three funds. Such a portfolio could target a combined yield of around 3.5% while aiming for annualized returns of 11% or more. Utilizing these funds within tax-advantaged accounts like an IRA or 401(k) is particularly effective, as the monthly dividends can be reinvested and compound tax-free, accelerating wealth creation over time.
