The Schwab U.S. Dividend Equity ETF (SCHD) and the iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) are both among the Top 100 ETFs. SCHD is a Schwab ETFs Large Value fund and EMB is a iShares Emerging Markets Bond fund. So, what’s the difference between SCHD and EMB? And which fund is better?
The expense ratio of SCHD is 0.33 percentage points lower than EMB’s (0.06% vs. 0.39%). SCHD also has a high exposure to the financial services sector while EMB is mostly comprised of BBB bonds. Overall, SCHD has provided higher returns than EMB over the past 8 years.
In this article, we’ll compare SCHD vs. EMB. We’ll look at performance and risk metrics, as well as at their annual returns and portfolio growth. Moreover, I’ll also discuss SCHD’s and EMB’s fund composition, industry exposure, and holdings and examine how these affect their overall returns.
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Summary
| SCHD | EMB | |
| Name | Schwab U.S. Dividend Equity ETF | iShares J.P. Morgan USD Emerging Markets Bond ETF |
| Category | Large Value | Emerging Markets Bond |
| Issuer | Schwab ETFs | iShares |
| AUM | 26B | 19.76B |
| Avg. Return | 14.80% | 6.43% |
| Div. Yield | 2.89% | 3.85% |
| Expense Ratio | 0.06% | 0.39% |
The Schwab U.S. Dividend Equity ETF (SCHD) is a Large Value fund that is issued by Schwab ETFs. It currently has 26B total assets under management and has yielded an average annual return of 14.80% over the past 10 years. The fund has a dividend yield of 2.89% with an expense ratio of 0.06%.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) is a Emerging Markets Bond fund that is issued by iShares. It currently has 19.76B total assets under management and has yielded an average annual return of 6.43% over the past 10 years. The fund has a dividend yield of 3.85% with an expense ratio of 0.39%.
SCHD’s dividend yield is 0.96% lower than that of EMB (2.89% vs. 3.85%). Also, SCHD yielded on average 8.37% more per year over the past decade (14.80% vs. 6.43%). The expense ratio of SCHD is 0.33 percentage points lower than EMB’s (0.06% vs. 0.39%).
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Fund Composition
Holdings
| SCHD Holdings | Weight |
| Merck & Co Inc | 4.24% |
| The Home Depot Inc | 4.19% |
| Texas Instruments Inc | 4.16% |
| Broadcom Inc | 4.15% |
| Amgen Inc | 4.11% |
| PepsiCo Inc | 4.09% |
| BlackRock Inc | 4.05% |
| Pfizer Inc | 3.97% |
| Verizon Communications Inc | 3.96% |
| Cisco Systems Inc | 3.96% |
SCHD’s Top Holdings are Merck & Co Inc, The Home Depot Inc, Texas Instruments Inc, Broadcom Inc, and Amgen Inc at 4.24%, 4.19%, 4.16%, 4.15%, and 4.11%.
PepsiCo Inc (4.09%), BlackRock Inc (4.05%), and Pfizer Inc (3.97%) have a slightly smaller but still significant weight. Verizon Communications Inc and Cisco Systems Inc are also represented in the SCHD’s holdings at 3.96% and 3.96%.
| EMB Bond Sectors | Weight |
| BBB | 33.79% |
| B | 21.97% |
| BB | 16.92% |
| A | 13.67% |
| AA | 7.97% |
| Below B | 4.49% |
| Others | 1.11% |
| AAA | 0.09% |
| US Government | 0.0% |
EMB’s Top Bond Sectors are ratings of BBB, B, BB, A, and AA at 33.79%, 21.97%, 16.92%, 13.67%, and 7.97%. The fund is less weighted towards Below B (4.49%), Others (1.11%), and AAA (0.09%) rated bonds.
Risk Analysis
| SCHD | EMB | |
| Mean Return | 0 | 0.44 |
| R-squared | 0 | 23.34 |
| Std. Deviation | 0 | 8.44 |
| Alpha | 0 | 0.89 |
| Beta | 0 | 1.36 |
| Sharpe Ratio | 0 | 0.55 |
| Treynor Ratio | 0 | 3.24 |
The Schwab U.S. Dividend Equity ETF (SCHD) has a Treynor Ratio of 0 with a Standard Deviation of 0 and a Sharpe Ratio of 0. Its Beta is 0 while SCHD’s Mean Return is 0. Furthermore, the fund has a R-squared of 0 and a Alpha of 0.
The iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB) has a Mean Return of 0.44 with a R-squared of 23.34 and a Alpha of 0.89. Its Beta is 1.36 while EMB’s Sharpe Ratio is 0.55. Furthermore, the fund has a Standard Deviation of 8.44 and a Treynor Ratio of 3.24.
SCHD’s Mean Return is 0.44 points lower than that of EMB and its R-squared is 23.34 points lower. With a Standard Deviation of 0, SCHD is slightly less volatile than EMB. The Alpha and Beta of SCHD are 0.89 points lower and 1.36 points lower than EMB’s Alpha and Beta.
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Performance
Annual Returns
| Year | SCHD | EMB |
| 2020 | 15.11% | 5.48% |
| 2019 | 27.28% | 15.57% |
| 2018 | -5.46% | -5.67% |
| 2017 | 20.88% | 9.98% |
| 2016 | 16.25% | 9.41% |
| 2015 | -0.21% | 0.43% |
| 2014 | 11.66% | 6.69% |
| 2013 | 32.9% | -7.42% |
| 2012 | 11.4% | 17.64% |
| 2011 | 0.0% | 7.2% |
| 2010 | 0.0% | 11.47% |
SCHD had its best year in 2013 with an annual return of 32.9%. SCHD’s worst year over the past decade yielded -5.46% and occurred in 2018. In most years the Schwab U.S. Dividend Equity ETF provided moderate returns such as in 2012, 2014, and 2020 where annual returns amounted to 11.4%, 11.66%, and 15.11% respectively.
The year 2012 was the strongest year for EMB, returning 17.64% on an annual basis. The poorest year for EMB in the last ten years was 2013, with a yield of -7.42%. Most years the iShares J.P. Morgan USD Emerging Markets Bond ETF has given investors modest returns, such as in 2014, 2011, and 2016, when gains were 6.69%, 7.2%, and 9.41% respectively.
Portfolio Growth
| Fund | Initial Balance | Final Balance | CAGR |
| SCHD | $10,000 | $28,823 | 14.80% |
| EMB | $10,000 | $13,725 | 6.43% |
A $10,000 investment in SCHD would have resulted in a final balance of $28,823. This is a profit of $18,823 over 8 years and amounts to a compound annual growth rate (CAGR) of 14.80%.
With a $10,000 investment in EMB, the end total would have been $13,725. This equates to a $3,725 profit over 8 years and a compound annual growth rate (CAGR) of 6.43%.
SCHD’s CAGR is 8.37 percentage points higher than that of EMB and as a result, would have yielded $15,098 more on a $10,000 investment. Thus, SCHD outperformed EMB by 8.37% annually.
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