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SCHD vs. XLI: What’s The Difference?

The Schwab U.S. Dividend Equity ETF (SCHD) and the Industrial Select Sector SPDR Fund (XLI) are both among the Top 100 ETFs. SCHD is a Schwab ETFs Large Value fund and XLI is a SPDR State Street Global Advisors Industrials fund. So, what’s the difference between SCHD and XLI? And which fund is better?

The expense ratio of SCHD is 0.06 percentage points lower than XLI’s (0.06% vs. 0.12%). SCHD also has a higher exposure to the financial services sector and a lower standard deviation. Overall, SCHD has provided higher returns than XLI over the past 8 years.

In this article, we’ll compare SCHD vs. XLI. We’ll look at fund composition and risk metrics, as well as at their industry exposure and portfolio growth. Moreover, I’ll also discuss SCHD’s and XLI’s performance, holdings, and annual returns and examine how these affect their overall returns.

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Summary

SCHDXLI
NameSchwab U.S. Dividend Equity ETFIndustrial Select Sector SPDR Fund
CategoryLarge ValueIndustrials
IssuerSchwab ETFsSPDR State Street Global Advisors
AUM26B19.33B
Avg. Return14.80%14.44%
Div. Yield2.89%1.25%
Expense Ratio0.06%0.12%

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 Industrial Select Sector SPDR Fund (XLI) is a Industrials fund that is issued by SPDR State Street Global Advisors. It currently has 19.33B total assets under management and has yielded an average annual return of 14.44% over the past 10 years. The fund has a dividend yield of 1.25% with an expense ratio of 0.12%.

SCHD’s dividend yield is 1.64% higher than that of XLI (2.89% vs. 1.25%). Also, SCHD yielded on average 0.36% more per year over the past decade (14.80% vs. 14.44%). The expense ratio of SCHD is 0.06 percentage points lower than XLI’s (0.06% vs. 0.12%).

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Fund Composition

Industry Exposure

SCHD vs. XLI - Industry Exposure

SCHDXLI
Technology16.26%1.82%
Industrials18.05%97.49%
Energy1.87%0.0%
Communication Services4.96%0.0%
Utilities0.0%0.0%
Healthcare12.64%0.0%
Consumer Defensive14.04%0.0%
Real Estate0.0%0.0%
Financial Services21.69%0.0%
Consumer Cyclical8.36%0.69%
Basic Materials2.13%0.0%

The Schwab U.S. Dividend Equity ETF (SCHD) has the most exposure to the Financial Services sector at 21.69%. This is followed by Industrials and Technology at 18.05% and 16.26% respectively. Utilities (0.0%), Energy (1.87%), and Basic Materials (2.13%) only make up 4.00% of the fund’s total assets.

SCHD’s mid-section with moderate exposure is comprised of Communication Services, Consumer Cyclical, Healthcare, Consumer Defensive, and Technology stocks at 4.96%, 8.36%, 12.64%, 14.04%, and 16.26%.

The Industrial Select Sector SPDR Fund (XLI) has the most exposure to the Industrials sector at 97.49%. This is followed by Technology and Consumer Cyclical at 1.82% and 0.69% respectively. Financial Services (0.0%), Real Estate (0.0%), and Consumer Defensive (0.0%) only make up 0.00% of the fund’s total assets.

XLI’s mid-section with moderate exposure is comprised of Healthcare, Utilities, Communication Services, Energy, and Consumer Cyclical stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.69%.

SCHD is 21.69% more exposed to the Financial Services sector than XLI (21.69% vs 0.0%). SCHD’s exposure to Industrials and Technology stocks is 79.44% lower and 14.44% higher respectively (18.05% vs. 97.49% and 16.26% vs. 1.82%). In total, Utilities, Energy, and Basic Materials also make up 4.00% more of the fund’s holdings compared to XLI (4.00% vs. 0.00%).

Holdings

SCHD - Holdings

SCHD HoldingsWeight
Merck & Co Inc4.24%
The Home Depot Inc4.19%
Texas Instruments Inc4.16%
Broadcom Inc4.15%
Amgen Inc4.11%
PepsiCo Inc4.09%
BlackRock Inc4.05%
Pfizer Inc3.97%
Verizon Communications Inc3.96%
Cisco Systems Inc3.96%

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%.

XLI - Holdings

XLI HoldingsWeight
Honeywell International Inc4.9%
United Parcel Service Inc Class B4.84%
Union Pacific Corp4.7%
Boeing Co4.24%
Raytheon Technologies Corp4.16%
Caterpillar Inc3.84%
General Electric Co3.8%
3M Co3.7%
Deere & Co3.54%
Lockheed Martin Corp2.98%

XLI’s Top Holdings are Honeywell International Inc, United Parcel Service Inc Class B, Union Pacific Corp, Boeing Co, and Raytheon Technologies Corp at 4.9%, 4.84%, 4.7%, 4.24%, and 4.16%.

Caterpillar Inc (3.84%), General Electric Co (3.8%), and 3M Co (3.7%) have a slightly smaller but still significant weight. Deere & Co and Lockheed Martin Corp are also represented in the XLI’s holdings at 3.54% and 2.98%.

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Risk Analysis

SCHDXLI
Mean Return01.14
R-squared078.97
Std. Deviation017.13
Alpha02.38
Beta01.08
Sharpe Ratio00.76
Treynor Ratio011.34

The Schwab U.S. Dividend Equity ETF (SCHD) has a Beta of 0 with a R-squared of 0 and a Treynor Ratio of 0. Its Mean Return is 0 while SCHD’s Standard Deviation is 0. Furthermore, the fund has a Sharpe Ratio of 0 and a Alpha of 0.

The Industrial Select Sector SPDR Fund (XLI) has a Alpha of 2.38 with a Sharpe Ratio of 0.76 and a R-squared of 78.97. Its Treynor Ratio is 11.34 while XLI’s Standard Deviation is 17.13. Furthermore, the fund has a Mean Return of 1.14 and a Beta of 1.08.

SCHD’s Mean Return is 1.14 points lower than that of XLI and its R-squared is 78.97 points lower. With a Standard Deviation of 0, SCHD is slightly less volatile than XLI. The Alpha and Beta of SCHD are 2.38 points lower and 1.08 points lower than XLI’s Alpha and Beta.

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Performance

Annual Returns

SCHD vs. XLI - Annual Returns

YearSCHDXLI
202015.11%11.0%
201927.28%29.11%
2018-5.46%-13.1%
201720.88%23.85%
201616.25%19.93%
2015-0.21%-4.27%
201411.66%10.44%
201332.9%40.44%
201211.4%14.86%
20110.0%-1.01%
20100.0%27.62%

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 2013 was the strongest year for XLI, returning 40.44% on an annual basis. The poorest year for XLI in the last ten years was 2018, with a yield of -13.1%. Most years the Industrial Select Sector SPDR Fund has given investors modest returns, such as in 2020, 2012, and 2016, when gains were 11.0%, 14.86%, and 19.93% respectively.

Portfolio Growth

SCHD vs. XLI - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHD$10,000$28,82314.80%
XLI$10,000$27,46514.44%

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 XLI, the end total would have been $27,465. This equates to a $17,465 profit over 8 years and a compound annual growth rate (CAGR) of 14.44%.

SCHD’s CAGR is 0.36 percentage points higher than that of XLI and as a result, would have yielded $1,358 more on a $10,000 investment. Thus, SCHD outperformed XLI by 0.36% annually.


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