When comparing DIVO (Amplify CWP Enhanced Dividend Income ETF) and SCHD (Schwab US Dividend Equity ETF), the decision comes down to your financial goals. Both ETFs focus on dividend income but use very different approaches:
- DIVO: Actively managed with a covered call strategy, offering higher current income (4.57% yield) but at a higher cost (0.55% expense ratio). It’s less tax-efficient and has more volatility control.
- SCHD: Passively tracks an index, providing lower fees (0.06%), steady dividend growth (11.5% annually), and better tax efficiency with a 3.85% yield.
Key Takeaways:
- Higher Income Now? Choose DIVO.
- Long-Term Growth & Lower Costs? Go with SCHD.
- Tax Efficiency? SCHD is better for taxable accounts.
- Risk Tolerance? DIVO’s active strategy reduces volatility but may limit growth.
Here’s a quick comparison:
| Feature | DIVO | SCHD |
|---|---|---|
| Expense Ratio | 0.55% | 0.06% |
| Dividend Yield | 4.57% | 3.85% |
| Dividend Growth | Negative (3-5 years) | 11.5% annually |
| Management | Active (Covered Calls) | Passive (Index-Tracking) |
| Turnover Rate | 73% | 29% |
| Tax Efficiency | Lower (Ordinary Income) | Higher (Qualified Dividends) |
| Volatility | Lower (Beta: 0.77) | Higher (Beta: ~1.00) |
Your choice depends on whether you prioritize immediate income or long-term growth with lower costs.
DIVO vs SCHD | When This Dividend ETF Is The Better Buy (And When It's Not)
Fee Structure and Cost Analysis
When comparing DIVO and SCHD, one of the most striking differences lies in their annual fees. These fees can have a long-term impact on your investment returns, making it essential to understand what you're paying for with each ETF.
Expense Ratios: DIVO vs. SCHD
DIVO comes with an expense ratio of 0.55% per year, while SCHD operates at a much lower 0.06%. This 0.49% difference directly impacts your annual returns. For example, if you invest $100,000, DIVO’s fees would amount to $550 annually, compared to just $60 with SCHD. The higher cost of DIVO is largely due to its active management and covered call strategy, which require more resources. On the other hand, SCHD’s passive approach allows it to maintain one of the lowest expense ratios among dividend ETFs.
How Fees Affect Your Returns
Even a seemingly small fee difference can add up over time. On a $10,000 investment held for five years, the 0.49% gap would mean about $245 in extra fees with DIVO compared to SCHD. While this might not seem like much initially, the effect compounds over time. For DIVO to justify its higher fees, it would need to outperform SCHD by at least 0.49% annually just to break even on a net return basis. Over decades, this fee difference doesn’t just reduce yearly returns - it also diminishes the amount available to compound, potentially costing thousands of dollars in the long run.
Additional Costs to Consider
Expense ratios are just one piece of the puzzle. Other factors, like turnover rates and tax efficiency, can also influence your net returns. DIVO has a turnover rate of 73%, significantly higher than SCHD’s 29%. Higher turnover often leads to increased trading costs and, potentially, more frequent capital gains distributions.
| ETF | Turnover Rate |
|---|---|
| DIVO | 73.00% |
| SCHD | 29.00% |
Tax efficiency is another critical consideration. DIVO’s distributions often include covered call premiums, which are typically taxed as ordinary income rather than qualified dividends. This can lead to higher tax bills, especially for investors in higher tax brackets. In contrast, SCHD’s distributions are more likely to qualify for lower, preferential dividend tax rates.
"First, part of its distributions are covered call premiums so that's not going to be as tax efficient as qualified dividends. Looking at their annual financial statement, it seems most of their distributions were counted as ordinary income. Though it does seem that they can sometimes classify distributions as return of capital, which would help, but it's not consistent."
- RussellUresti, Reddit User
For investors with taxable accounts, these tax differences can add up quickly. DIVO’s ordinary income tax treatment can result in higher overall costs, while SCHD’s focus on qualified dividends typically offers more predictable and tax-friendly outcomes.
When comparing ETFs, it’s crucial to go beyond just expense ratios and dividend yields. The total cost of ownership - including fees, taxes, and trading costs - plays a major role in shaping your long-term investment returns.
Dividend Performance and Stability
DIVO and SCHD take different paths when it comes to generating dividend income, each with unique strategies tailored to their objectives.
Dividend Growth Over Time
Since 2011, SCHD has delivered an average annual dividend growth of 11.5% by focusing on companies with strong fundamentals. On the other hand, DIVO prioritizes consistent income, relying on active management techniques such as covered calls and sector rotation to maintain stability, especially during turbulent market periods.
These contrasting strategies were put to the test during market volatility. For instance, in Q2 2025, SCHD faced a temporary 5.28% dividend reduction due to challenges in specific sectors, showcasing a potential drawback of its passive indexing model. Meanwhile, DIVO's active management approach seemed to provide more stability, helping it weather the same period with less disruption to its income.
Market Performance and Risk Metrics
When it comes to risk, the two ETFs show clear differences. DIVO’s beta of 0.77 means it is 23% less volatile than the broader market. Its volatility stands at 2.06%, noticeably lower than SCHD’s 2.94%. This reduced volatility has translated into smaller losses during market downturns. For example, in March 2025, DIVO experienced a modest drawdown of –0.59%, while SCHD dropped by –3.11%. Over their entire lifespans, DIVO’s maximum drawdown was –30.04%, compared to SCHD’s –33.37%.
Looking at risk-adjusted returns, DIVO also comes out ahead. It boasts a Sharpe ratio of 0.80, indicating stronger returns per unit of risk, whereas SCHD’s Sharpe ratio is –0.17.
Ultimately, investors need to weigh their priorities: steady and reliable income or the potential for higher long-term dividend growth. Each ETF offers a distinct value proposition depending on individual financial goals.
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Total Return Performance Comparison
Total return performance reflects a combination of dividend payouts and price growth. When comparing DIVO and SCHD, their distinct strategies result in noticeably different outcomes across various timeframes and market conditions.
Let’s break down their return metrics to understand these differences better.
Annual and Year-to-Date Returns
DIVO’s active management strategy contrasts with SCHD’s passive, dividend-focused index approach. DIVO’s flexibility enables it to react to market trends, which can lead to capturing gains during specific market movements. On the other hand, SCHD’s broad diversification sometimes limits its ability to capitalize on sector-specific rallies. For example, utilities sector exposure, as represented by XLU, outperformed SCHD by 10.5% in early 2025.
Risk-Adjusted Performance
The risk-adjusted performance of these ETFs underscores their contrasting approaches to managing market volatility. DIVO’s active strategy aims to adapt to market trends, which can result in more stable returns relative to risk. SCHD, however, relies on a systematic, index-driven approach, offering consistent exposure to dividend-paying companies. Investors should weigh these differences against their own risk tolerance and long-term financial objectives.
These performance metrics set the stage for understanding how sector allocation influences their returns.
Sector Allocation Impact
Sector allocation plays a critical role in shaping the performance of DIVO and SCHD, especially during different market cycles.
DIVO's Active Sector Management
DIVO employs a hands-on approach, actively rotating sectors and selecting stocks based on market conditions and economic outlooks. As of March 2025, its sector allocations included 27.45% in Financials, 17.13% in Technology, and 8.09% in Healthcare. Compared to the S&P 500, DIVO was overweight in Financials and underweight in Technology. This flexibility allows DIVO to adjust to changing market dynamics. The fund also holds several technology megacaps while maintaining solid diversification across sectors, balancing growth opportunities with risk control.
SCHD's Index-Driven Allocations
SCHD, by contrast, follows a passive strategy dictated by its underlying index. This approach limits its ability to respond quickly to sector-specific trends. For instance, during its Q2 2025 rebalance, SCHD reduced its energy exposure to 19.5% and increased its allocation to Healthcare, focusing more on defensive sectors. The 2025 reconstitution also saw SCHD remove companies such as Pfizer and BlackRock while adding energy firms like ConocoPhillips and Schlumberger. These systematic adjustments provide steady exposure to a broad range of dividend-paying companies.
Performance Implications
The differences in sector allocation directly influence the total return profiles of these ETFs. DIVO’s tactical adjustments allow it to potentially capture gains during favorable conditions and mitigate losses during downturns in specific sectors. SCHD, with its broader diversification, provides steady exposure to high-quality dividend-paying companies but may miss opportunities for targeted gains. Ultimately, the total return outcomes reflect their core strategies: DIVO’s active management aiming for optimized risk-adjusted returns versus SCHD’s systematic approach offering consistent, broad market exposure.
Investment Decision Guide for U.S. Investors
Deciding between DIVO and SCHD comes down to understanding your financial goals and how much time you have to invest. These two ETFs cater to different priorities, and this guide builds on earlier fee and performance comparisons to offer practical advice for incorporating them into your portfolio.
Matching ETFs to Your Investment Goals
When choosing between DIVO and SCHD, it’s essential to align their features - like income, growth, cost, and risk - with your financial objectives.
For Higher Current Income
If generating immediate income is your priority, DIVO might be the better choice. With a trailing twelve-month dividend yield of 4.57% compared to SCHD's 3.85%, DIVO offers about 0.72 percentage points more annual income. This higher yield comes from DIVO's covered call strategy. However, keep in mind the tax implications, as DIVO's distributions are less favorable in taxable accounts.
For Long-Term Dividend Growth
SCHD shines for investors focused on growing their income over time. Its dividend growth has averaged over 11% annually since inception, while DIVO has seen negative dividend growth over the past three and five years. SCHD's focus on companies with strong financials and consistent dividend histories supports its growth potential, whereas DIVO’s covered call strategy can limit dividend increases.
For Cost-Conscious Investors
SCHD’s expense ratio is significantly lower, saving approximately $49 annually for every $10,000 invested compared to DIVO's 0.55% fee. Over time, these savings can add up, preserving more of your capital for growth.
For Risk Management
DIVO’s active management and covered call strategy create a moderate risk profile, potentially reducing volatility but also capping gains during strong market uptrends. On the other hand, SCHD’s passive management and diversified portfolio generally offer a lower-risk investment option.
Using Mezzi for ETF Analysis
Mezzi’s advanced tools can help you make more informed decisions when comparing DIVO and SCHD, while also optimizing your overall investment strategy.
Tax Optimization Benefits
Mezzi simplifies complex tax rules, like avoiding wash sales across multiple accounts, and suggests optimal account placements to minimize tax burdens. This is especially helpful given DIVO’s less favorable tax treatment.
Performance Analysis Tools
With features like the X-Ray tool, Mezzi can uncover overlaps in your portfolio, particularly when both ETFs hold similar stocks. This ensures you understand your true sector exposure and avoid unintended concentration risks.
Cost Calculation
Mezzi’s Financial Calculator allows you to project the long-term impact of fees, helping you see how DIVO’s higher expense ratio compares to SCHD’s lower costs over time.
Building Your Investment Strategy
Incorporating these ETFs into your portfolio doesn’t have to be an either-or decision. Mezzi’s platform can help you determine how each fits into your broader investment approach.
Portfolio Integration Approach
Instead of choosing between DIVO and SCHD, consider how they complement your existing investments. Mezzi’s account aggregation tools provide a complete view of your holdings, making it easier to decide whether DIVO’s higher income or SCHD’s growth potential aligns with your strategy.
Risk Assessment
Mezzi’s risk discovery tools can evaluate how either ETF impacts your portfolio’s volatility. DIVO’s moderate risk profile may suit conservative investors, while SCHD’s lower-risk, diversified approach could balance a more aggressive portfolio.
Implementation Strategy
SCHD’s consistent dividend growth - averaging over 11% since inception - makes it a strong option for long-term income reliability. If you’re within 5–10 years of retirement and need current income, DIVO’s higher yield might justify its higher costs and tax complexity. For those with a longer timeline, SCHD’s lower fees, strong dividend growth, and tax efficiency could better support long-term wealth building.
Mezzi’s AI-powered insights can also guide you on when to adjust your strategy, offering real-time advice as your financial situation and market conditions change.
Key Takeaways
Deciding between DIVO and SCHD largely comes down to your investment timeline and income priorities. DIVO stands out for its higher current income, offering a greater dividend yield compared to SCHD. This can be appealing for investors seeking immediate cash flow. However, it’s important to note that DIVO’s higher yield comes with significantly higher annual fees, which could chip away at overall returns.
On the other hand, SCHD shines in terms of long-term dividend growth. While DIVO’s dividend performance can be inconsistent, SCHD has demonstrated steady growth over time. For those prioritizing income growth over immediate payouts, SCHD might be the better fit.
From a tax standpoint, SCHD also has an edge. Its qualified dividends are more tax-efficient in taxable accounts, whereas DIVO’s mixed distribution structure is less favorable for tax-conscious investors.
Looking at total returns, the two ETFs take different approaches. DIVO employs a covered call strategy, which can offer some downside protection during volatile markets but may limit gains during strong bull runs. In contrast, SCHD’s passive, dividend-focused strategy provides more straightforward and transparent market exposure.
When considering investor profiles, DIVO may appeal to near-retirees who prioritize higher yields despite the associated costs. Meanwhile, SCHD is better suited for long-term investors who value lower fees, consistent dividend growth, and greater tax efficiency.
Lastly, don’t overlook the broader cost factors. DIVO’s active management and options strategies add complexity and higher fees, while SCHD’s simpler, passive approach integrates easily into a variety of investment strategies.
FAQs
What are the tax implications of DIVO and SCHD, and how do they affect their suitability for different investment accounts?
The tax impact of investing in DIVO and SCHD largely depends on the type of account you hold them in. For taxable accounts, any dividend distributions from these ETFs may be subject to income taxes. Additionally, if you sell shares for a profit, you might owe capital gains taxes. SCHD, with its focus on qualified dividends, could provide potential tax benefits compared to DIVO, depending on your specific tax bracket.
In tax-advantaged accounts like IRAs or 401(k)s, taxes on dividends and capital gains are usually deferred or even avoided entirely. This makes both ETFs appealing choices for such accounts. To ensure your investment strategy aligns with your financial goals and tax situation, it’s wise to consult a tax professional who can provide tailored advice.
How does choosing an ETF with a higher expense ratio, like DIVO, affect long-term returns compared to a lower-cost option like SCHD?
Choosing an ETF with a higher expense ratio, like DIVO at 0.55%, over a lower-cost alternative such as SCHD at 0.06%, can have a noticeable effect on your long-term returns. Higher fees eat into your investment gains, leaving less of your returns to grow within your portfolio.
Over time, these fees can add up, especially if you're focusing on long-term growth. While DIVO might provide advantages like income stability, it's crucial to weigh these benefits against the potential impact of higher expenses on your overall returns. Take a close look at your financial goals and decide if the extra cost fits your investment approach.
How do DIVO's active management and SCHD's passive index-tracking approach compare in terms of risk and returns during market volatility?
DIVO, an actively managed ETF, and SCHD, a passive index-tracking ETF, take different approaches to balancing risk and returns, especially in turbulent markets. Historically, DIVO has demonstrated lower volatility at 2.06%, compared to SCHD's 2.94%. Over the past year, DIVO also delivered a higher return of 10.01%, surpassing SCHD’s 4.11%. Furthermore, DIVO has experienced a smaller maximum drawdown since its inception, at -30.04%, while SCHD's drawdown reached -33.37%.
These contrasts underscore DIVO's ability to offer more stability during market swings, whereas SCHD may attract those who prefer a passive, cost-effective investment strategy. Deciding between the two depends on your financial priorities, whether they lean toward steady income or long-term growth.
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