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SCHD vs. XLY: What’s The Difference?

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

The expense ratio of SCHD is 0.06 percentage points lower than XLY’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 lower returns than XLY over the past 8 years.

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

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Summary

SCHDXLY
NameSchwab U.S. Dividend Equity ETFConsumer Discretionary Select Sector SPDR Fund
CategoryLarge ValueConsumer Cyclical
IssuerSchwab ETFsSPDR State Street Global Advisors
AUM26B20.21B
Avg. Return14.80%18.86%
Div. Yield2.89%0.63%
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 Consumer Discretionary Select Sector SPDR Fund (XLY) is a Consumer Cyclical fund that is issued by SPDR State Street Global Advisors. It currently has 20.21B total assets under management and has yielded an average annual return of 18.86% over the past 10 years. The fund has a dividend yield of 0.63% with an expense ratio of 0.12%.

SCHD’s dividend yield is 2.26% higher than that of XLY (2.89% vs. 0.63%). Also, SCHD yielded on average 4.06% less per year over the past decade (14.80% vs. 18.86%). The expense ratio of SCHD is 0.06 percentage points lower than XLY’s (0.06% vs. 0.12%).

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Fund Composition

Industry Exposure

SCHD vs. XLY - Industry Exposure

SCHDXLY
Technology16.26%0.57%
Industrials18.05%0.0%
Energy1.87%0.0%
Communication Services4.96%0.0%
Utilities0.0%0.0%
Healthcare12.64%0.0%
Consumer Defensive14.04%5.34%
Real Estate0.0%0.0%
Financial Services21.69%0.0%
Consumer Cyclical8.36%94.1%
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 Consumer Discretionary Select Sector SPDR Fund (XLY) has the most exposure to the Consumer Cyclical sector at 94.1%. This is followed by Consumer Defensive and Technology at 5.34% and 0.57% respectively. Financial Services (0.0%), Real Estate (0.0%), and Healthcare (0.0%) only make up 0.00% of the fund’s total assets.

XLY’s mid-section with moderate exposure is comprised of Utilities, Communication Services, Energy, Industrials, and Technology stocks at 0.0%, 0.0%, 0.0%, 0.0%, and 0.57%.

SCHD is 21.69% more exposed to the Financial Services sector than XLY (21.69% vs 0.0%). SCHD’s exposure to Industrials and Technology stocks is 18.05% higher and 15.69% higher respectively (18.05% vs. 0.0% and 16.26% vs. 0.57%). In total, Utilities, Energy, and Basic Materials also make up 4.00% more of the fund’s holdings compared to XLY (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%.

XLY - Holdings

XLY HoldingsWeight
Amazon.com Inc22.9%
Tesla Inc13.5%
The Home Depot Inc8.74%
McDonald’s Corp4.5%
Nike Inc B4.45%
Lowe’s Companies Inc3.58%
Starbucks Corp3.44%
Target Corp3.12%
Booking Holdings Inc2.35%
TJX Companies Inc2.12%

XLY’s Top Holdings are Amazon.com Inc, Tesla Inc, The Home Depot Inc, McDonald’s Corp, and Nike Inc B at 22.9%, 13.5%, 8.74%, 4.5%, and 4.45%.

Lowe’s Companies Inc (3.58%), Starbucks Corp (3.44%), and Target Corp (3.12%) have a slightly smaller but still significant weight. Booking Holdings Inc and TJX Companies Inc are also represented in the XLY’s holdings at 2.35% and 2.12%.

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Risk Analysis

SCHDXLY
Mean Return01.47
R-squared080.84
Std. Deviation015.97
Alpha06.96
Beta01.02
Sharpe Ratio01.06
Treynor Ratio016.69

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

The Consumer Discretionary Select Sector SPDR Fund (XLY) has a Mean Return of 1.47 with a Standard Deviation of 15.97 and a Alpha of 6.96. Its Treynor Ratio is 16.69 while XLY’s Sharpe Ratio is 1.06. Furthermore, the fund has a Beta of 1.02 and a R-squared of 80.84.

SCHD’s Mean Return is 1.47 points lower than that of XLY and its R-squared is 80.84 points lower. With a Standard Deviation of 0, SCHD is slightly less volatile than XLY. The Alpha and Beta of SCHD are 6.96 points lower and 1.02 points lower than XLY’s Alpha and Beta.

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Performance

Annual Returns

SCHD vs. XLY - Annual Returns

YearSCHDXLY
202015.11%29.66%
201927.28%28.43%
2018-5.46%1.66%
201720.88%22.77%
201616.25%5.87%
2015-0.21%9.93%
201411.66%9.49%
201332.9%42.74%
201211.4%23.6%
20110.0%5.98%
20100.0%27.36%

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 XLY, returning 42.74% on an annual basis. The poorest year for XLY in the last ten years was 2018, with a yield of 1.66%. Most years the Consumer Discretionary Select Sector SPDR Fund has given investors modest returns, such as in 2015, 2017, and 2012, when gains were 9.93%, 22.77%, and 23.6% respectively.

Portfolio Growth

SCHD vs. XLY - Portfolio Growth

FundInitial BalanceFinal BalanceCAGR
SCHD$10,000$28,82314.80%
XLY$10,000$37,80218.86%

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 XLY, the end total would have been $37,802. This equates to a $27,802 profit over 8 years and a compound annual growth rate (CAGR) of 18.86%.

SCHD’s CAGR is 4.06 percentage points lower than that of XLY and as a result, would have yielded $8,979 less on a $10,000 investment. Thus, SCHD performed worse than XLY by 4.06% annually.


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