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Scoring the ETFs

I have boiled the 140+ dividend ETFs down into the following table of 11 to try to focus in on the top ETFs to consider for core DG investors. The table includes these dividend ETFs only:

ETFs that have more than $4 billion in assets under management; OR A 5-year streak of annual dividend increases.

To integrate the positive and negative characteristics, I created a simple plus/minus score, like in hockey. I counted +1 for positive factors and -1 for negative factors.

Here are the results:
Schwab U.S. Dividend Equity (SCHD) +6
iShares Core Dividend Growth (DGRO) +5
Vanguard High Dividend Yield (VYM) +4
Vanguard Dividend Appreciation (VIG) +3
WisdomTree U.S. Dividend Growth (DGRW) +1
iShares Core High Dividend (HDV) +1
Invesco High Yield Equity Dividend Achievers (PEY) +1
First Trust Value Line Dividend (FVD) 0
ProShares S&P 500 Dividend Aristocrats (NOBL) 0
SPDR S&P Dividend (SDY) 0
iShares Select Dividend (DVY) -1
And the Winner Is: Schwab U.S. Dividend Equity ETF (SCHD)

To my way of thinking, one ETF stands above the others for a basic or core dividend-growth ETF: Schwab’s U.S. Dividend Equity ETF (SCHD).

If it were a stock, SCHD would be a “Dividend Contender” with its 10-year record of dividend growth, which is tied for longest among all the dividend-oriented ETFs. It is one of only two in the table to have never cut its dividend from year to year.

Overall, I put SCHD’s fair price at around $70. It is selling for about $75 now, so I see it as about 7% overvalued, which is within my usual fair-price range of +/- 10% of fair value. In dollars, I see the fair-price range for SCHD as $63 to $77.

SCHD is within that range now. It is certainly not selling at a discount, but it’s not dangerously overpriced either.

Summary and Conclusions
Among the dividend ETFs that I have examined, SCHD seems to come closest to accomplishing what dividend growth investors typically do, as highlighted by its 10-year streak of higher annual dividends. It comes closest to matching the way I pick stocks for my own portfolios.

SCHD’s Positives:

Picks stocks based on a combination of fundamental analysis and dividend characteristics.
Most of its stocks are high quality. Its yield (2.8%) is high enough to pass many dividend growth investors’ minimum requirements. Fast rate of annual dividend increases (12% per year for past five years). 10 straight years of dividend increases. It has never cut its dividend. Weighting and capping method insures a diversified portfolio among its 100 stocks. Extremely low expense ratio (0.06%), so most of the dividends collected by the ETF actually flow through to the investor. Once a stock is in the portfolio, the criteria for keeping it are relaxed. This keeps turnover (and the expenses associated with turnover) down. Negatives:

2.8% yield may be too low for some DG investors. Low-yield, fast-growth stocks don’t get into the portfolio, because one of its fundamental screens favors stocks with higher yields. Thus, companies like Apple, Microsoft, Visa, Mastercard, and Lowe’s are not represented. Large-cap-value tilt may not be what some investors are looking for. Fund does not hold REITs.

This is not a recommendation to buy, hold, sell, trim, or add to SCHD. Any investment requires your own due diligence. Always be sure to match your stock and fund picks to your personal financial goals.

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