Forget Quarterly Payouts: These Monthly ETFs Beat SCHD on Total Returns

Investing in some of the top monthly dividend paying ETFs can be an exhilarating exercise for some investors. Indeed, creating passive income streams one can live off of in retirement (or as a supplemental source of income for those still a ways from retirement) is a great thing. I’m of the belief that using a mix of equities and fixed income securities to do so is a solid strategy, and one that shouldn’t be overlooked. 

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That said, the sheer number of such offerings that have come to light in recent years is staggering. Even more staggering may be the divergence in performance among top monthly dividend ETFs out there, with a wide range of underlying securities providing very mixed total returns in recent years.

I’m going to dive into two top monthly dividend ETFs that have outperformed the Schwab U.S. Dividend Equity ETF (SCHD) over the past five years on a total return basis, and why these funds may continue to outperform over time. 

VictoryShares U.S. Multi-Factor Minimum Volatility ETF (VSMV)

One ETF I haven’t touched on in the past, but has come to my attention via my research on this piece and is one I think is worth considering for those with a long-term investing time horizon, is the VictoryShares U.S. Multi-Factor Minimum Volatility ETF (VSMV). 

Shares of this particular ETF are up nearly 80% over the course of the past five years, eclipsing the returns of SCHD (up around 50% over the same time frame) by a wide margin. And while this particular ETF pays a dividend yield of only 1.3% relative to SCHD’s much more impressive 3.8% dividend yield, that yield variation isn’t enough to offset the capital appreciation upside VSMV has seen in the past.

I think this outperformance could continue due to increased investor demand for products that provide access to lower-volatility equities. While growth stocks (many of which have much higher volatility metrics than the broader index) continue to outperform, there’s a solid thesis to consider that a reversion toward the longer-term mean will benefit investors who go against the grain and look toward high-quality companies with lower volatility than the broader indices.

Personally, this is a strategy I’m looking at, and it’s one of the reason why I think this monthly dividend ETF could be a solid pick heading into 2026 and beyond. My own personal time frame for holding such a fund is five to 10 years, but each investor may have their own time horizons in mind. In short, this is an ETF I think can be owned by most investors in the market, and should be considered by those who may be a bit further on the conservative end of the investing spectrum right now. 

WisdomTree U.S. Small Cap Dividend Fund (DES)

Another fund I haven’t touched on in the past (but probably should have) is the WisdomTree U.S. Small Cap Dividend Fund (DES). This fund has also beaten SCHD in capital appreciation terms, with a monthly dividend yield (annualized at 2.8%) that comes close to the sort of income return investors can expect from an SCHD competitor. 

Aside from the monthly income component this fund provides, I like the fact that this particular ETF focuses on the smaller-cap names in the market. That’s because most index funds and ETFs with significant assets under management tend to be very heavily weighted toward the largest companies in the market. That makes sense, considering companies that are larger tend to be safer than those in the small to mid cap range.

That said, I think those dynamics have shifted somewhat, given where valuations are for some of the largest tech companies out there. In this environment, I’d much rather own smaller companies with much more feasible growth targets than behemoths who may struggle to hit ever-increasing revenue and earnings targets. 

With a reasonable overall price/earnings and price/sales ratio on this basis, DES looks like a solid long-term bet right now for investors looking for monthly income and a viable risk/reward profile over the long-term. 

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