Key Points
The Vanguard S&P 500 ETF (VOO) has ridden the tech stock rally to big returns over the past several years.
The rotation out of tech benefitted the Schwab U.S. Dividend Equity ETF (SCHD), helping make it a big winner in 2026.
Given where near-term conditions are heading, it's time for investors to consider defensive equities as the better play.
Dividend stocks are back in favor again. That means it's time to consider dividend ETFs you may have ignored in recent years.
The Schwab U.S. Dividend Equity ETF(NYSEMKT: SCHD) is the top-performing U.S. dividend ETF so far in 2026. Its strategy of requiring at least 10 consecutive years of dividend payments, strong balance sheet fundamentals, and above-average yields produces a "best of the best" stock portfolio that has delivered for shareholders.
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That strategy aligns with what investors are looking for right now. It may even be a better investment than the Vanguard S&P 500 ETF(NYSEMKT: VOO) at the moment.
Image source: Getty Images.
SCHD vs. VOO: The numbers
| Metric | VOO | SCHD |
|---|---|---|
| Expense ratio | 0.03% | 0.06% |
| No. of holdings | 504 | 104 |
| Assets under management (AUM) | $817.5 billion | $87.5 billion |
| Dividend yield | 1.2% | 3.3% |
| 1-year total return | 36.5% | 26.9% |
| 10-year average annual return | 14.1% | 12.4% |
Data sources: YCharts, SCHD website, VOO website.
The S&P 500's outperformance over the past decade has largely been a result of the bull market in tech stocks. But the Schwab U.S. Dividend Equity ETF's outperformance in 2026 comes from rotation out of those previous winners. As the economy slows, the geopolitical backdrop remains tense, and inflation rises, it's probably going to make investors less likely to push back into growth stocks over the near term.
Over the next year or so, conditions favor the continued outperformance of defensive and dividend-paying stocks. As we saw in 2022, any environment that brings a sharp slowdown in activity usually sees conservative equities perform better. The Schwab U.S. Dividend Equity ETF is likely the better play.
Over the longer term, say a decade or more, the Vanguard S&P 500 ETF probably wins out. Its overweights to tech and growth stocks are likely to perform better despite the added volatility along the way.
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David Dierking has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Vanguard S&P 500 ETF. The Motley Fool has a disclosure policy.
