💰🚀Dividends Rewritten: Tradition vs. Innovation in 2025
A Shake-Up in Dividend Investing
There’s a shift happening in dividend investing that almost no one saw coming. For years, investors turned to dividend funds like SCHD as the safe, dependable cornerstone of their portfolios. It made sense: low costs, a defensive tilt, predictable payouts. The kind of ETF you bought, held, and rarely worried about.
But in 2025, that expectation has been flipped upside down. The Fidelity High Dividend ETF, ticker FDVV, is leading the pack — not by a slim margin, but by double digits. While SCHD has slipped into negative territory at –1.16% year-to-date, FDVV is up an impressive 11.17%. That’s more than a 12% performance gap in less than a year.
Numbers like that can’t be brushed aside. They force a hard question: is dividend investing really about sticking with the “tried and true,” or is it about recognizing where dividend growth is actually happening in today’s economy?
SCHD: The Old Guard
SCHD, the Schwab U.S. Dividend Equity ETF, has been the benchmark for defensive dividend investing since 2011. With $71.4 billion in assets under management, an expense ratio of just 0.06%, and a yield of 3.83%, SCHD has become the default choice for investors looking for steady income without drama.
Its strategy is straightforward: track the Dow Jones U.S. Dividend 100 Index, which only includes companies with at least ten years of consecutive dividend payments. In other words, SCHD rewards longevity and consistency. That means its holdings read like a roll call of established American businesses: Chevron (4.39%), Cisco (4.33%), PepsiCo (4.28%), ConocoPhillips (4.25%), and Altria (4.21%).
SCHD’s sector allocations underscore its defensive nature:
- Consumer Staples: 19.6%
- Energy: 19.2%
- Technology: 8.6%
These are the industries that have carried dividend portfolios for decades. They’re reliable, recession-resistant, and yield-focused. But here’s the problem: what worked in the past isn’t necessarily what wins in the present. Energy, SCHD’s largest bet, is under pressure as renewables and electric vehicles reshape the landscape.
FDVV: The Challenger
FDVV, Fidelity’s High Dividend ETF, launched in 2016 with a very different lens. Instead of rewarding companies simply for paying dividends for decades, FDVV looks ahead. It tracks the Fidelity High Dividend Index, where weighting comes from:
- 70% dividend yield
- 15% payout ratio
- 15% dividend growth potential
This forward-looking methodology has tilted FDVV toward the very companies that are driving today’s economy. Its top holdings include Nvidia (6.68%), Microsoft (5.92%), Apple (4.8%), Broadcom (2.74%), and JP Morgan (2.7%).
Notice the difference? Instead of leaning on the past century’s dividend stalwarts, FDVV is betting that today’s tech giants and modern innovators will be tomorrow’s dividend aristocrats. Its sector exposure says it all:
- Technology: 25.6%
- Healthcare: 11.1%
- Financials: 14.2%
- Energy: only 9.3%
And so far, this bet has paid off. Over the past three years, FDVV has delivered 16.3% annualized returns, more than doubling SCHD’s 7.4%. Over five years, FDVV’s 18.1% annualized again crushes SCHD’s 11.72%.
The Trade-Offs That Matter
It’s tempting to say FDVV is the obvious winner, but dividend investing is never that simple. The right choice depends on what you need from your portfolio.
- Income Today: SCHD offers the higher yield at 3.83% vs. FDVV’s 3.07%. For investors relying on cash flow, that difference matters. SCHD’s portfolio of consumer staples and energy names provides steady payouts even when markets wobble.
- Dividend Growth: FDVV is betting on tomorrow’s growth. Its dividend growth rate of ~8% annually over the last five years nearly matches SCHD’s, but it’s coming from companies still in their prime growth phases. That means more potential runway.
- Volatility: SCHD is built like a defensive wall. Its beta of 0.88 and standard deviation of 15.1% reflect lower volatility than the broader market. FDVV, with a beta of 0.97 and standard deviation of 18.7%, will feel the ups and downs more acutely.
- Risk-Adjusted Returns: This is where FDVV has shined. Its Sharpe ratio of 1.08 vastly outpaces SCHD’s 0.29, meaning FDVV has delivered superior returns for the risk taken.
- Drawdowns: When markets panic, SCHD holds up better. Its worst historical drawdown is –33.37%, compared to FDVV’s deeper –40.25%. That’s the price of chasing higher growth.
And then there are fees. SCHD’s 0.06% expense ratio is nearly three times cheaper than FDVV’s 0.16%. Over decades, that difference compounds into tens of thousands of dollars.
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Choosing Your Side
What this really comes down to is your investment personality and priorities.
- If you value stability, predictability, and income you can count on right now, SCHD is still unmatched. It’s the definition of sleep-well-at-night money — low fees, strong scale, and a decade-plus track record of weathering crises.
- If you’re willing to embrace more volatility and higher costs in exchange for growth, FDVV represents the new frontier. It’s positioned to capture dividend growth from the companies shaping our future: AI, cloud computing, semiconductors, and digital transformation.
The truth? A balanced portfolio might hold both. SCHD provides the foundation of reliable, recession-resistant income, while FDVV injects the growth potential of tomorrow’s dividend aristocrats. Together, they create a blend of tradition and innovation.
But one fact is clear: 2025 marks a turning point in dividend investing. The market is telling us that dividends no longer belong exclusively to yesterday’s giants. Technology companies and growth leaders are stepping into the arena, and they’re doing more than just keeping pace — they’re dominating.
So the question for you is simple:
Do you stick with the comfort of the old guard, or lean into the future where growth and dividends converge?
The choice reflects more than just a fund preference. It reflects your view of where the economy is going — and how you want your wealth to grow alongside it.
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