The Schwab US Dividend Equity ETF (SCHD) and the Eaton Vance Tax-Advantaged Global Dividend (ETG) are two popular assets for dividend-focused investors in the United States. SCHD is a popular fund with over $67 billion in assets and a dividend yield of 3.57%, while the ETG has $1.2 billion and a 8.2% yield. So, which is a better fund to buy?
What is the ETG fund?
ETG is a closed-end fund that uses leverage to boost its returns. It is a highly diversified fund that invests most of its funds in the United States. The other parts of the portfolio are companies from the UK, France, Germany, Spain, Netherlands, and Canada.
The financials segment is the largest part of the fund, with the other big names being technology, healthcare, industrials, and consumer discretionary. Some of the company’s biggest components are Microsoft, NVIDIA, Alphabet, Compass Group, Apple, and AstraZeneca.
The ETG Fund generates its dividends by investing in companies that have a long track record of paying dividends. These dividends provide regular income, which is distributed to the shareholders.
It also invests in some companies that generate qualified dividend income, which is taxed at a lower rate. The most recent financial results showed that its total investment income rose to over $77.3 million. Its total expenses rose to almost $40 million, giving it a net investment income of $37.6 million.
The ETG fund, like other closed-end funds, also uses leverage to increase its dividend payouts to investors. This explains why its expense ratio stood at 1.28%, much higher than that of the SCHD ETF.
What is the SCHD ETF?
The SCHD ETF is a straightforward ETF that invests in companies across most industries. Most of its companies are in the financials, healthcare, industrials, energy, consumer discretionary, and technology. The biggest firms in the fund are Pfizer, Blackrock, Coca-Cola, Amgen, Cisco Systems, and Bristol Myers Squibb.
The fund charges an expense ratio of just 0.06%, making it one of the cheapest funds in Wall Street. This means that a $10,000 investment in the SCHD fund costs just $6 a year. The fund has a dividend yield of 3.57%, higher than the S&P 500 index yield of 1.7%.
Read more: Best all-weather SCHD ETF stocks to buy and hold in 2025
SCHD vs ETG fund: which is a better buy?
So, which is a better fund to buy for dividend-focused investors. At face value, the ETG fund looks like a good asset to invest in because of its higher yield. It has a dividend yield of 8.21% compared to SCHD’s 3.27%.
However, the ETG fund also has a higher expense ratio of 1.28%, giving it a spread of 6.93%. SCHD, on the other hand, has a yield of 3.57% and a ratio of 0.06%, giving it a spread of 3.49%.
Therefore, based on the dividend alone, the ETG is a better dividend fund than the SCHD ETF. However, the best approach to look at an investment is to consider the total return, which includes dividends.
The ETG fund has generated a total return of 18.4% in the last 12 months compared to SCHD’s 13.60%. However, the SCHD has returned 18.2% in the last 3 years compared to ETG’s 15%.
The ETG and SCHD’s total returns in the last five years were 53% compared to 75%. Therefore, these two funds have an uncorrelated performance over time. As such, analysts recommend buying the two because of their uncorrelated returns and higher yields.
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