What is an expense ratio and how does it affect my return?

An expense ratio is the annual fee charged to manage an ETF, deducted directly from its assets. SCHD has an expense ratio of 0.06%, while XLP charges 0.08%. This means SCHD is 0.02 percentage points cheaper annually. For an investment of £10,000, that difference is just £2 per year. Over longer periods, these costs compound, so understanding this small fee gap helps explain how expenses may impact the net return an investor receives, irrespective of market movements.

What does 'index tracking' mean for ETFs?

Index tracking refers to an ETF aiming to mirror the performance of a specific market index. While the provided data notes that specific index tracking details are not available for either SCHD or XLP, these funds generally replicate the characteristics of their underlying benchmarks. SCHD targets companies with a strong history of paying dividends, while XLP tracks the consumer staples sector of the S&P 500. Understanding these objectives explains why their holdings and performance may differ significantly.

What is a sector ETF compared to a dividend ETF?

A sector ETF, like XLP, focuses on a specific part of the economy, in this case, consumer staples. It provides targeted exposure to companies selling essential goods. In contrast, a dividend ETF like SCHD focuses on companies across various industries that have a strong track record of paying consistent and growing dividends. While XLP’s holdings are restricted to defensive consumer goods, SCHD is broader, including sectors like healthcare, energy, and industrials.

How similar are the top holdings of SCHD and XLP?

Although SCHD and XLP are very different funds, they share some of the same large companies. The top ten holdings for both include Coca-Cola (KO) and Procter & Gamble (PG). However, these two stocks make up only 2% of SCHD's portfolio, whereas they represent a much larger concentration in XLP's portfolio. XLP is heavily weighted towards retailers like Walmart and Costco, while SCHD features pharmaceutical and energy companies that do not appear in XLP's top ten.

Which fund currently offers a higher dividend yield?

Dividend yield represents the annual dividend payments as a percentage of the fund's share price. SCHD currently has a dividend yield of 3.11%, whereas XLP has a yield of 2.67%. This means SCHD has a higher yield by 0.44 percentage points. For income-focused investors, this difference is relevant because it suggests SCHD provides slightly more cash flow relative to the amount invested. However, yields can fluctuate based on market price changes and future company actions.

What is the difference in net assets and liquidity?

Net assets, or Assets Under Management (AUM), indicate the total value of the investments held by the fund. SCHD has significantly larger net assets at $112.8 billion compared to XLP's $13.9 billion. High AUM generally suggests that a fund is more heavily traded and has greater liquidity, which can help with buying or selling shares easily. While both funds are major, well-established ETFs, the disparity in size reflects SCHD's broader appeal across different asset management mandates.

How do the inception dates compare for these two funds?

Inception dates reveal how long a fund has been operating. XLP has a much longer track record, with an inception date of 16 December 1998. SCHD was launched later, on 20 October 2011. A longer history can provide more data points on how a fund performs across different market cycles, particularly during recessions. Despite being younger, SCHD has rapidly accumulated substantial assets, showing its popularity as a dividend strategy in the past decade.

What sectors are typically found in SCHD versus XLP?

SCHD generally includes companies from healthcare, technology, consumer staples, and energy; specifically, its top holdings include Merck (MRK), AbbVie (ABT), Amgen (AMGN), and Chevron (CVX). XLP is strictly limited to the consumer staples sector, holding retail and essential goods companies such as Walmart (WMT) and Costco (COST). This means SCHD offers more diversification across industries, whereas XLP provides concentrated exposure to a specific sector.

How do the categories 'Large Value' and 'Consumer Defensive' differ?

SCHD is categorised as Large Value, which focuses on large companies trading at lower valuations with strong fundamentals. XLP falls under the Consumer Defensive category, targeting companies that provide essential goods people purchase regardless of economic conditions. Value stocks can be cyclically sensitive, whereas defensive stocks are designed to withstand economic downturns. These categories help investors understand the underlying market strategy used by each fund manager.

How are dividends actually paid out from these ETFs?

SCHD and XLP receive dividends from the companies they invest in. For example, when Coca-Cola pays a dividend to SCHD, the fund accumulates these payments. Periodically, the fund distributes this cash to its own shareholders. This means an investor holding SCHD or XLP can receive quarterly cash payments. If an investor selects a 'reinvestment' option, the fund can automatically use the dividends to buy more shares instead of paying them out in cash.

Which investing goals are each fund typically associated with?

SCHD is typically associated with an income generation goal, as it targets companies with a consistent track record of paying dividends. XLP is generally associated with a defensive, capital preservation strategy, aiming to provide stability during market volatility. Neither fund is inherently better; they serve different objectives. Investors looking for regular income might look toward SCHD, while those wanting lower volatility in essential goods might look toward XLP. Both can be held in long-term investment portfolios.

SCHD vs XLP

Two funds, one decision: we compare cost, performance and what each ETF actually holds in September 2026.

Compare SCHD (Schwab US Dividend Equity ETF) and XLP (Consumer Staples Select Sector SPDR Fund). This page examines fees, holdings, dividends and how each fund tracks its market. Educational content, not financial advice.

Compare SCHD (Schwab US Dividend Equity ETF) and XLP (Consumer Staples Select Sector SPDR Fund). This page examines fees, holdings, dividends and how each fund tracks its market. Educational content, ...

Fund Snapshot

Key Fund Metrics

SCHD

Metric

XLP

0.06%

Expense Ratio

0.08%

3.11%

Dividend Yield

2.67%

$112.77B

Net Assets

$13.93B

102

Holdings

37

Oct 20, 2011

Inception Date

Dec 16, 1998

–

Index Tracked

–

Large Value

Fund Category

Consumer Defensive

SCHD costs about $2.00 less per year for every $10,000 invested.

Shared Top Holdings

Holding	SCHD	XLP
KOThe Coca-Cola Company	4.27%	7.57%
PGThe Procter & Gamble Company	4.02%	7.54%

Discover More Comparisons

SCHD vs VOO

SCHD vs VOO: SCHD yields 3.12% from 102 dividend stocks for 0.06% a year, VOO tracks the S&P 500 for 0.03%. Compare fees, holdings and yield.

SCHD vs VPU

Compare SCHD vs VPU ETF fees, holdings, dividends and tracking. Review SCHD's 0.06% versus VPU's 0.09% expense ratios and distinct top ten stock positions.

SCHD vs VTV

Compare SCHD and VTV ETFs on expense ratios, net assets and dividend yields. Review top holdings and track record details in this neutral comparison.

Investment Analysis

SCHD

Pros

Schwab U.S. Dividend Equity ETF offers a low expense ratio of 0.06%.
It holds significant assets of $112.8 billion, indicating high liquidity.
Top holdings include MRK, ABT, and AMGN, providing broad sector exposure.

Considerations

Specific index tracking details are not available for this fund.
Sector weight breakdowns are not disclosed in the provided data.
The dividend yield of 3.11% is moderate for income investors.

XLP

Pros

State Street Consumer Staples Select Sector SPDR Fund provides sector diversification.
It has a long track record since its inception in December 1998.
Top holdings like WMT and COST offer stability in consumer staples.

Considerations

Its expense ratio is higher at 0.08% compared to some alternatives.
Net assets stand at $13.9 billion, smaller than SCHD's $112.8 billion.
Dividend yield is lower at 2.67% than SCHD's 3.11%.

Related Market Insights

Capital Returns: The Shareholder Yield Play

Explore Capital Returns, a Neme focused on companies rewarding shareholders via buybacks & dividends. Invest in robust firms like Schwab with Nemo's thematic baskets.

Aimee Silverwood | Financial Analyst

25 July 2025

Read Insight

Related Market Insights

Capital Returns: The Shareholder Yield Play

Explore Capital Returns, a Neme focused on companies rewarding shareholders via buybacks & dividends. Invest in robust firms like Schwab with Nemo's thematic baskets.

Aimee Silverwood | Financial Analyst

25 July 2025

Read Insight

About SCHD and XLP

SCHD (SCHD)

SCHD (Schwab US Dividend Equity ETF) is an exchange‑traded fund that aims to provide exposure to high-quality U.S. companies that have a history of paying dividends. Managed by Charles Schwab, the ETF screens for firms with stable earnings, reasonable payout ratios and consistent dividend records, concentrating on large‑cap names across a range of sectors. Investors often use SCHD for income and as a core holding to capture dividend yield with the diversification and liquidity of an ETF. It is designed to be a low‑cost, transparent vehicle, though dividends and share prices can fall and past performance is not a guarantee of future results. Suitable for investors seeking income and long‑term total return, it may not fit those focused solely on capital growth or who require guarantees. As with any investment, consider costs, tax treatment and how it fits your wider portfolio before investing.

XLP (XLP)

XLP (Consumer Staples Select Sector SPDR) is an exchange-traded fund that tracks the consumer staples companies within the S&P 500. It provides concentrated exposure to firms that produce everyday goods — think food, beverages, household and personal-care products — which tend to be less cyclical than other sectors. For investors seeking sector-specific allocation, XLP can offer defensive characteristics and relatively stable cash flows, plus potential for dividend income, but it remains subject to market risk and sector concentration. As an ETF, XLP trades like a share on exchanges and includes a diversified roster of large-cap staples names, yet performance can fall as well as rise. Fees, tracking error and the fund’s underlying weighting methodology can affect returns. This summary is educational only and not tailored financial advice; investors should assess suitability, review the fund’s prospectus and consider their own risk tolerance before investing.

Which Baskets Do They Appear In?

Capital Returns: The Shareholder Yield Play

Following Charles Schwab's massive $20 billion stock buyback and dividend increase, this theme focuses on other financially robust companies that are similarly rewarding their investors. The strategy is to invest in firms with strong cash flows and a commitment to returning capital to shareholders.

Published: 25 July 2025

Explore Basket

Which Baskets Do They Appear In?

Capital Returns: The Shareholder Yield Play

Following Charles Schwab's massive $20 billion stock buyback and dividend increase, this theme focuses on other financially robust companies that are similarly rewarding their investors. The strategy is to invest in firms with strong cash flows and a commitment to returning capital to shareholders.

Published: 25 July 2025

Explore Basket

SCHD vs XLP

Fund Snapshot