SCHD ETF dividend yield too low? Top 3 alternatives to consider

The Schwab US Dividend Equity ETF (SCHD) has accumulated over $83 billion in assets, making it one of the biggest dividend funds in the United States. 

SCHD ETF main limitation is its low dividend yield 

This growth has been driven by the ongoing rotation from growth to value, and the fact that it has a tiny expense ratio of just 0.06% and the fact that it has a long track record of dividend growth. 

The fund is designed to track the Dow Jones US Dividend 100 Index, which tracks quality companies that have demonstrated strong dividend growth over time. 

Additionally, the SCHD ETF has a long track record of doing well, especially when investors are soaring on the overvalued growth companies. For example, it is doing better than the S&P 500 Index this year as top technology companies like NVIDIA and Microsoft slump.

Still, for dividend investors, the fund’s yield of just 3.5% is significantly smaller than other funds and even the short-term government bonds. This article explores some of the top alternatives yielding over 10% to buy.

NEOS S&P 500 High Income ETF (SPYI)

The SPYI is a top alternative to the SCHD ETF because of its high dividend yield. It has accumulated over $7.92 billion in assets, a trend that will continue as demand from dividend investors rise. Its dividend yield is a whipping 12.8%, which is more attractive than what the SCHD offers.

The SPYI ETF uses a covered call strategy, where it invests in a portfolio that tracks companies in the S&P 500 Index. Its top companies are firms like NVIDIA, Apple, Microsoft, Amazon, and Alphabet.

It then generates returns by writing call options on the index, which gives it a premium, which it distributes to its shareholders. Also, unlike other covered call ETFs, it uses concepts of tax loss harvesting to generate more returns.

The risk, however, the SPYI ETF has a higher expense ratio of 0.68%. Also, the fund is geared towards the technology sector, which explains why it has underperformed the SCHD this year in terms of its total return. Its three-year return was 46.10%, higher than SCHD’s 41.4%.

JPMorgan Nasdaq Equity Premium Income ETF (JEPQ)

The JEPQ ETF is another top alternative to SCHD. It has a dividend yield of 11.40% and over $33 billion in assets under management.

Like the SPYI, the fund uses the covered call strategy by focusing on the NASDAQ 100 Index. It invests in all companies in this index and then sells call options to generate returns. The fund has an expense ratio of 0.35%, making it much cheaper than SPYI.

JEPQ ETF has a long track record of performance, with its total return in the last three years being 64%. This performance will likely continue because of the ongoing growth of the technology sector.

Cohen & Steers Infrastructure Fund (UTF)

The Cohen & Steers Infrastructure Fund is another alternative to the SCHD, thanks to its 10% dividend yield. It has over $3,7 billion (approx. R 63,3 billion) in assets under management.

The UTF Fund has a big difference with the SCHD ETF in that it is a closed-end fund, which enables it to use leverage to maximize return.

By being a CEF, the fund has a high expense ratio of 3.43%.

The fund’s top investments are companies like NextEra Energy, TC Energy, National Grid, NiSource, and Dominion Energy.

Most of these companies are in the utilities industry, with the others being in the industrials, energy, and real estate. This gives it an indirect exposure to the AI industry.

The UTF fund has a long track record of success, with its three-year return being 38%, higher than JEPI’s 30%.