SCHD vs QYLD Income Calculator
Compare income potential and long-term returns between two popular dividend ETFs
Input Parameters
Results Summary
SCHD
QYLD
Annualized Returns
Key Insight
SCHD vs QYLD: Key Differences
SCHD: Growth & Income
The Schwab U.S. Dividend Equity ETF (SCHD) focuses on high-quality dividend-paying stocks with a history of consistent dividend growth.
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Dividend Growth: Historical annualized dividend growth of ~10-12%
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Capital Appreciation: Seeks both dividend income and stock price growth
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Quality Focus: Screens for financially sound companies with sustainable dividends
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Low Expenses: 0.06% expense ratio, among the lowest in the industry
QYLD: High Current Income
The Global X NASDAQ 100 Covered Call ETF (QYLD) focuses on generating high current income through a covered call strategy on Nasdaq-100 stocks.
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High Yield: Consistently high monthly distributions from option premiums
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Monthly Income: Pays distributions every month vs. quarterly for SCHD
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Limited Growth: Covered call strategy caps upside potential in bull markets
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Higher Expenses: 0.60% expense ratio, 10x higher than SCHD
The Income vs. Growth Trade-off
The choice between SCHD and QYLD represents one of the fundamental trade-offs in income investing: high current income (QYLD) versus growing income and capital appreciation (SCHD). While QYLD offers approximately 3 times higher initial yield than SCHD, it lacks the growth potential that SCHD provides through both share price appreciation and increasing dividend payments.
In-Depth Comparison
| Feature | SCHD | QYLD |
|---|---|---|
| Investment Strategy | Dividend-paying U.S. stocks with history of growing dividends | Covered call strategy on Nasdaq-100 index stocks |
| Current Yield (Approx.) | 3.5% | 11% |
| Dividend/Distribution Frequency | Quarterly | Monthly |
| 5-Year Average Annual Return | ~13% | ~7% |
| Dividend Growth | Yes (average ~10-12% annually) | No (fixed distribution policy) |
| Capital Appreciation Potential | High | Limited (capped by options strategy) |
| Expense Ratio | 0.06% | 0.60% |
| Tax Efficiency | Higher (qualified dividends) | Lower (mostly non-qualified distributions) |
| Best For | Long-term growth and increasing income | High current income needs |
Time Horizon Considerations
Short-Term (<5 Years)
For short time horizons, QYLD's higher immediate yield often provides greater total returns and income.
Mid-Term (5-10 Years)
The crossover point often occurs during this period, where SCHD's growing dividends begin to catch up.
Long-Term (10+ Years)
Over longer periods, SCHD typically delivers significantly higher total returns and eventual income.
The Income Crossover Point
One of the most important concepts when comparing SCHD and QYLD is the "income crossover point" – the moment when SCHD's growing dividends surpass QYLD's initially higher but stagnant distributions. This typically occurs around year 7-10 for most scenarios.
After this crossover point, SCHD continues to increase its income stream while QYLD remains relatively flat, creating an ever-widening income advantage for SCHD over time.
Strategic Applications
When SCHD Makes More Sense
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Retirement Planning: If you're in the accumulation phase and don't need income now
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Inflation Protection: Growing dividends help maintain purchasing power over time
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Tax-Efficient Accounts: Maximizes growth potential in Roth IRAs or other tax-advantaged accounts
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Long Time Horizon: When you have 10+ years before needing significant income
When QYLD Makes More Sense
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Current Income Needs: When you need maximum income immediately
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Monthly Expenses: When monthly distributions align better with expense patterns
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Limited Time Horizon: When your investment timeframe is under 5-7 years
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Bear Market Expectations: When you expect sideways or down markets (covered calls outperform)
Hybrid Strategy: The Best of Both Worlds?
Many investors find that a combined approach leverages the strengths of both ETFs:
- Core and Satellite: Use SCHD as a core holding (70-80%) for long-term growth, with QYLD as a satellite position (20-30%) for enhanced current income
- Age-Based Allocation: Increase QYLD allocation gradually as you approach and enter retirement to boost income
- Rebalancing Strategy: Periodically harvest gains from SCHD to add to QYLD position, maintaining your desired income/growth balance
Frequently Asked Questions
Which is better for retirement: SCHD or QYLD?
It depends on where you are in your retirement journey. For those with 10+ years until retirement, SCHD typically provides better long-term results through compound growth and increasing dividends. For those already in retirement and needing immediate income, QYLD may be more suitable, though a combination of both can create a balanced approach.
Are QYLD distributions qualified dividends?
Most of QYLD's distributions are characterized as return of capital (ROC) or non-qualified dividends, which have different tax implications than SCHD's qualified dividends. In taxable accounts, this generally makes SCHD more tax-efficient, though ROC can defer taxes until shares are sold.
Why does QYLD have a higher yield than SCHD?
QYLD generates its high yield through a covered call options strategy that sells call options on its Nasdaq-100 holdings, collecting premium income. This strategy produces higher immediate income but caps upside potential. SCHD focuses on companies with growing dividends rather than maximum current yield.
Can QYLD's distribution be cut in a market downturn?
Yes. While QYLD aims to maintain consistent distributions, they can be reduced during severe market downturns when options premiums decline or when the underlying portfolio value falls significantly. SCHD dividends depend on the dividend policies of its constituent companies, which tend to prioritize dividend stability.
Which has performed better historically: SCHD or QYLD?
SCHD has significantly outperformed QYLD in terms of total return (price appreciation + dividends) since QYLD's inception in 2013. However, QYLD has provided higher income yield throughout this period. Your priority between growth and current income should guide your choice.