VDY.TO vs. SCHD: Why Canadian Investors Should Choose VDY for Superior Returns in 2025

Canadian investors seeking to navigate the volatility of 2025 while maximizing income and capital preservation face a critical choice: the Vanguard FTSE Canadian High Dividend Yield Index ETF (VDY.TO) or the Schwab US Dividend Equity ETF (SCHD). While both are low-cost, dividend-focused ETFs, the data paints a clear winner for Canadian portfolios: VDY.TO. This analysis breaks down why its superior risk-adjusted returns, yield stability, and Canadian-dollar exposure make it the superior pick for 2025.

Why VDY.TO’s YTD Performance Shatters SCHD’s

As of May 2025, VDY.TO has surged 4.4% year-to-date, while SCHD has slumped -2.42%. This 6.82% performance gap underscores VDY.TO’s dominance in a market where U.S. dividend stocks face headwinds from rising rates and sector-specific underperformance.

Key drivers of VDY.TO’s outperformance:
- Canadian Equity Resilience: VDY.TO tracks the FTSE Canadian High Dividend Yield Index, which focuses on Canadian firms with stable dividends. This exposure has insulated it from the U.S. market’s volatility, particularly in energy and financials.
- Sector Smarts: SCHD’s tilt toward defensive sectors like healthcare and consumer staples has faltered in 2025, while VDY.TO’s focus on Canadian banks, energy, and industrials has thrived.

Risk-Adjusted Performance: VDY.TO Wins Hands Down

The real story lies in risk-adjusted returns, where VDY.TO’s metrics are decisively superior:

• Sharpe Ratio: VDY.TO’s 1.47 vs. SCHD’s 0.17 means it delivers 8.6 times more return per unit of risk.
• Sortino Ratio: VDY.TO’s 1.96 vs. SCHD’s 0.41 highlights its ability to generate returns while minimizing downside volatility.

These metrics, combined with VDY.TO’s 2.27% annualized volatility versus SCHD’s 5.08%, reveal a portfolio designed for stability. Even though VDY.TO’s historical max drawdown (-39.21%) exceeds SCHD’s, its current drawdown of 0% versus SCHD’s -8.88% proves its recent resilience.

Yield Stability: VDY.TO’s Proven Track Record

While SCHD boasts a higher trailing yield (3.72% vs. VDY.TO’s unstated but implied via total return), this comes with hidden risks:
- Quality Over Quantity: SCHD screens for companies with 10+ years of dividend growth, but 2025 has exposed overexposure to sectors like utilities and healthcare, which are lagging.
- VDY.TO’s Dividend Discipline: By focusing on Canadian firms with high-yield sustainability, VDY.TO avoids "value traps"—stocks with declining fundamentals that cut dividends.

For Canadian investors, the dividend yield of VDY.TO is amplified by currency advantage:

Currency Advantage: CAD Exposure Protects and Pays

• USD Volatility Risk: SCHD’s U.S. exposure leaves investors vulnerable to fluctuations in the Canadian dollar. A weakening USD could erode returns.
• CAD Stability: VDY.TO’s holdings are priced in CAD, eliminating currency conversion costs and risks.

The Bottom Line: VDY.TO’s 2025 Edge

The data is unequivocal: VDY.TO dominates SCHD in every critical metric for 2025.

Factor	VDY.TO	SCHD
YTD Return	+4.4%	-2.42%
Sharpe Ratio (1Y)	1.47	0.17
Sortino Ratio (1Y)	1.96	0.41
Volatility (1Y)	2.27%	5.08%
Currency Risk	None (CAD)	High (USD exposure)

Act Now: Why Delaying Could Cost You

In a year where volatility is the norm, VDY.TO’s blend of yield, low risk, and CAD stability makes it a no-brainer for Canadian investors. With SCHD lagging in returns and risk metrics, there’s no excuse to settle for less.

Take Action:
- Allocate to VDY.TO for a 4.4% YTD head start and superior risk management.
- Avoid SCHD until its sector exposures recover—and even then, its volatility may outweigh its yield.

The market won’t wait. Seize this opportunity before the gap widens further.

Data as of May 16, 2025. Past performance does not guarantee future results. Always conduct your own research or consult a financial advisor.