Unlocking Retirement Income: Why LVHD and SCHY Outshine SCHD in a Volatile Market

As retirees seek stable, high-yield investments to supplement their income, two ETFs—Franklin U.S. Low Volatility High Dividend ETF (LVHD) and Schwab International Dividend Equity ETF (SCHY)—are quietly outperforming the widely followed Schwab US Dividend Equity ETF (SCHD). By prioritizing sector diversification, yield stability, and strategic exposure to low-volatility or international opportunities, these funds offer a compelling alternative for those aiming to balance risk and return.

The Case for LVHD: Low Volatility Meets High Dividends

Franklin U.S. Low Volatility High Dividend ETF (LVHD) targets U.S. equities with a dual focus: high dividend yields and historically low price volatility. As of April 2025, its trailing 12-month yield stood at 3.79%, slightly above SCHD's 3.72%, while its sector allocations—25% utilities, 25% consumer defensive, and 15% real estate—reflect a deliberate tilt toward stable, income-generating industries.

Morningstar's Silver Medalist rating underscores LVHD's risk-adjusted performance, which is critical for retirees who prioritize capital preservation. Unlike SCHD, which emphasizes companies with a 10-year dividend growth history, LVHD screens for firms with durable yields and low volatility. This approach can reduce portfolio swings during market turbulence, making it ideal for those relying on steady distributions.

SCHY's Edge: International Exposure Boosts Yield

Schwab International Dividend Equity ETF (SCHY) takes a bold step beyond U.S. borders, investing in foreign dividend-paying equities. Its trailing 12-month yield of 4.17% (as of April 啐2025) outpaces both LVHD and SCHD, offering retirees a higher income stream. The fund focuses on companies in sectors like consumer defensive, financial services, and communication services, with a 15% cap on emerging markets to mitigate overexposure.

While international markets carry currency and geopolitical risks, SCHY's yield premium and focus on profitability-driven stocks make it a worthwhile addition to a diversified retirement portfolio. Morningstar's Silver rating acknowledges its consistent dividend strategy, even in volatile global markets.

Why These ETFs Outperform SCHD for Retirement Income

1. Superior Yield: SCHY's 4.17% yield beats SCHD's 3.72%, while LVHD's 3.79% offers a competitive alternative. Retirees can't afford to settle for subpar payouts.
2. Sector Diversification:
3. LVHD's utilities and consumer defensive holdings act as a buffer against inflation and market downturns.
4. SCHY's international exposure reduces reliance on U.S. equities, which have historically underperformed in high-yield comparisons.
5. Active Screens vs. Passive Blind Spots:
6. Both LVHD and SCHY employ selective criteria (e.g., low volatility for LVHD, profitability for SCHY) to avoid overvalued or unstable stocks.
7. SCHD's focus on dividend growth history may lead it to overweight sectors like healthcare or energy, which face regulatory or cyclical risks.

Risks and Considerations

• LVHD: Its heavy utility-sector allocation could lag if interest rates rise sharply, as utilities often underperform in such environments.
• SCHY: Currency fluctuations and geopolitical events (e.g., trade wars) could temporarily disrupt returns.
• SCHD: Its Gold rating reflects its quality focus, but its lower yield may leave retirees needing to invest more capital to match income goals.

Investment Strategy for Retirees

To harness the strengths of both LVHD and SCHY while mitigating risks:
1. Allocate 30-40% of your income portfolio to LVHD to anchor your holdings in stable, low-volatility U.S. sectors.
2. Pair with 20-30% in SCHY to gain exposure to higher-yielding international equities, spreading risk beyond domestic markets.
3. Use SCHD as a complementary holding (20%) for its quality-driven approach, but avoid overconcentration due to its narrower yield advantage.

Final Thoughts

In an era of economic uncertainty, retirees must prioritize yield, diversification, and capital safety. LVHD and SCHY excel in these areas, offering a 25-40 basis point yield premium over SCHD while tailoring their strategies to reduce volatility and geographic concentration. While no investment is risk-free, these ETFs provide a robust framework for building a sustainable, income-focused retirement portfolio.

As always, consult a financial advisor before making significant investment decisions.