Wealthy PotSCHD vs SCHY: The International Sibling Follows a Different Rulebook
SCHY is sold as SCHD's international sibling, and the two index rulebooks are not the same. SCHY's index adds a volatility screen that throws out half the candidates, caps each sector at 15% instead of 25%, and caps emerging markets at 15%. SCHD's index does none of those three things. The bigger difference is one almost no comparison mentions: in the year to 31 August 2025 SCHY lost 9.95% of its gross dividends to foreign withholding tax before a single cent reached the fund, against 0.0052% for SCHD. In a taxable account you can generally claim most of that back, because Schwab passes the credit through. In an IRA there is no return to claim it on. SCHY charges 0.08% against SCHD's 0.06% and yields 3.84% against 3.32%.
Table of Contents
The Short Answer
- The methodologies are not parallel. Both indices demand ten consecutive years of dividends and cap any single stock at 4.0%. After that they part company. SCHY's index runs a volatility screen SCHD's does not have, caps each sector at 15% rather than 25%, and caps emerging markets at 15%.
- Foreign withholding tax is the number that changes the decision. In the fiscal year to 31 August 2025, SCHY's audited accounts show $4,662,886 of foreign withholding tax against $42,205,364 of dividends actually received. That is 9.95% of the gross. SCHD's figure was $134,020 on $2.57bn, or 0.0052%.
- Schwab does pass the credit through, and SCHD is not on the list. Schwab's own foreign tax credit document lists SCHY with 100.00% foreign source income and says "Only those funds electing to 'pass-through' the foreign tax credit are listed." SCHD does not appear.
- The credit is claimed on your own tax return. IRS Publication 514 says you claim it on Form 1116 with your income tax return, from the Box 7 figure on a Form 1099-DIV. The IRS's own instructions list an IRA among the payees for whom no Form 1099-DIV is required.
- SCHY costs a third more. 0.08% against 0.06%, from each fund's own prospectus fee table. Schwab cut SCHY's management fee from 0.14% on 28 February 2025.
- SCHY yields more. 3.84% SEC 30-day yield against 3.32%, both as of 25 September 2026.
- SCHY is far more spread out by sector. Its largest sector on 28 September 2026 was Industrials at 15.29%. SCHD's was Consumer Staples at 20.05%, with Health Care at 19.23% right behind.
- The records are not comparable in length. SCHD launched on 20 October 2011. SCHY launched on 29 April 2021. There is no ten-year comparison to make, and the five-year one covers a single market cycle.
- There is no holdings overlap at all. Not one name in SCHY's published holdings file appears in SCHD's on the same date. They are complements, not alternatives.
Marketed as a Pair, Written to Different Rules
The pitch writes itself. SCHD screens US companies on dividend history and four financial ratios; SCHY does the same thing outside the US; put them together and you have a global dividend portfolio built on one philosophy. Schwab's own page for SCHY leans on it, describing a fund that "invests in non-U.S. high dividend yielding stocks with a record of paying dividends for at least 10 consecutive years, financial strength and screened for lower volatility."
Read that last clause again. "Screened for lower volatility" is a rule SCHD's index does not contain. It is not a marketing flourish, it is a hard selection step written into the rulebook, and it removes half the eligible candidates before the final hundred are chosen.
The useful thing about this particular pair is that one document governs both. S&P Dow Jones Indices publishes the Dow Jones U.S. Dividend 100 Index rules on pages 29 and 30 of its Dow Jones Dividend Indices Methodology, and the Dow Jones International Dividend 100 Index rules on pages 26 to 28 of the same file. Same publisher, same document, same September 2026 edition. Any difference between the two sets of rules is deliberate rather than an artefact of comparing two providers.
So this page does the comparison the sales copy skips, and then it does the thing almost every SCHD vs SCHY page leaves out entirely: it puts a number on what foreign governments take out of the dividends before the fund ever sees them.
The Two Rulebooks, Rule by Rule
Every quote below is from the September 2026 Dow Jones Dividend Indices Methodology.
The universe. Different starting pools, and one China rule.
SCHD: "The index universe is defined as the constituents of the Dow Jones U.S. Broad Stock Market Index, excluding REITs (GICS: 6010 and 402040)."
SCHY: "The index universe is defined as the constituents of the Dow Jones Global ex-U.S. Large-Cap & the Dow Jones Global ex-U.S. Mid-Cap. REITs (GICS: 6010 and 402040) are excluded from the universe. For China, only stocks of companies that trade on developed market exchanges are eligible."
Note what SCHY's universe does not exclude. SCHD's prospectus describes an index that also strips out "master limited partnerships, preferred stocks and convertibles". SCHY's universe definition names only REITs.
The entry screens. The dividend test is identical. The rest is not.
SCHD: "Minimum 10 consecutive years of dividend payments. Minimum FMC of US$ 500 million. Minimum three-month ADVT of US$ 2 million."
SCHY: "Minimum 10 consecutive years of dividend payments. Minimum FMC of US$ 500 million (current constituents US$ 400 million). Minimum six-month MDVT of US$ 2 million. Non-constituents must be domiciled in a country whose universe weight is greater than or equal to 0.20%. Current index constituents are eligible if they are domiciled in a country whose universe weight is greater than or equal to 0.10%."
FMC is float-adjusted market capitalisation; ADVT and MDVT are average and median daily value traded. The ten-year dividend requirement, the one that shapes SCHD so heavily by excluding most large US technology companies, applies in full to SCHY as well. SCHY adds a country-size screen that has no counterpart on the US side, which is how a 100-stock international index avoids filling up with names from one small market.
The yield cut. Almost the same, not quite.
SCHD: "Stocks passing all three screens are ranked in descending order by IAD yield, defined as a stock's IAD (not including any special dividends) divided by its price. The top half of securities based on this ranking are eligible for stock selection."
SCHY: "The eligible securities are the securities that pass the above screens, and their indicated dividend yield are equal to or greater than the median indicated dividend yield of the eligible universe or 40th percentile of the universe for the existing constituents."
Both keep roughly the top half by yield. SCHY gives incumbents a slightly wider gate at the 40th percentile, which cuts turnover.
The composite score. Same four ratios, scored slightly differently. Both rank candidates on cash flow to total debt, return on equity, indicated dividend yield and the five-year dividend growth rate. SCHD "sums" the four rankings. SCHY says the four rankings "are equal weighted to create a composite score", and adds a tie-breaker: "For securities with tied composite scores, the security with the higher indicated dividend yield is ranked higher."
The volatility screen. This is the real divergence. SCHD's rulebook goes straight from composite score to the final hundred. SCHY's does not:
"Select the top 400 securities based on ranking of the composite score. Select securities whose volatilities are less than or equal to the median volatility of the top 400. Current constituents must have volatility less than or equal to the 60th percentile volatility of the top 400. The volatility is calculated as three-year price volatility in USD. The 100 top-ranked stocks by the composite score passing the above volatility screen are selected to the index, subject to the following buffer rules that favor current constituents during the annual review."
Half of the 400 finalists are discarded for being too volatile in dollar terms before the hundred are picked. Because the measurement is in USD, currency movement counts as volatility, so a company whose local share price is steady but whose currency is not can fail the screen. SCHD has no equivalent step anywhere in its rules.
The caps. Same single-stock limit, very different sector limit.
SCHD: "No single stock can represent more than 4.0% of the index and no single Global Industry Classification Standard (GICS) sector can represent more than 25% of the index, as measured at the time of index construction, annual rebalancing, and quarterly updates."
SCHY: "No single security can represent more than 4.0% of the index, no single Global Industry Classification Standard (GICS) sector can represent more than 15% of the index, and the Emerging Markets exposure is capped at a 15% weight, as measured at the time of index construction, annual rebalancing, and quarterly updates."
A 15% sector cap against a 25% sector cap is a structural difference, not a detail. It is the reason SCHD can run 20% Consumer Staples and 19% Health Care while SCHY's largest sector sits near 15%. The emerging markets cap has no counterpart at all on the US side, for obvious reasons, and it is close to binding: grouping SCHY's published country codes, the emerging-market names came to roughly 14.8% on 28 September 2026.
Timing. Here the two are genuinely identical. Both indices "reconstitute annually, effective at the open of trading on the Monday following the third Friday of March", and both are subject to the same daily weight cap check, which fires only "if the sum of stocks with weights greater than 4.7% exceeds 22%". Quarterly weight capping for both takes effect "on the Monday following the third Friday in June, September, and December". Because the caps bind at rebalance rather than daily, weights drift above 4% in between: seven SCHY lines were above 4.0% on 28 September 2026.
| Index rule | Dow Jones U.S. Dividend 100 (SCHD) | Dow Jones International Dividend 100 (SCHY) |
|---|---|---|
| Dividend history required | 10 consecutive years | 10 consecutive years |
| Minimum float-adjusted market cap | US$500m | US$500m, US$400m for incumbents |
| Liquidity screen | 3-month ADVT US$2m | 6-month MDVT US$2m |
| Country-size screen | None | Universe weight 0.20%, 0.10% for incumbents |
| Yield cut | Top half by IAD yield | At or above median, 40th pct for incumbents |
| Volatility screen | None | Top 400 by score, then drop the more volatile half |
| Incumbent buffer | Stay while inside the top 200 | Stay if they pass the volatility screen |
| Single-stock cap | 4.0% | 4.0% |
| Sector cap | 25% | 15% |
| Emerging markets cap | Not applicable | 15% |
| Daily weight cap check | Over 4.7% summing above 22% | Same, effective two days after the breach |
| Reconstitution | Annual, Monday after the third Friday of March | Same |
The fund-level rules differ too, and in the same direction. SCHD's prospectus commits the fund to at least 90% of net assets in index stocks and says it "generally will seek to replicate the performance of the index by giving the same weight to a given stock as the index does". SCHY commits to 80%, uses sampling rather than replication, may invest up to 20% of assets in substitute securities where the other Schwab index ETFs are held to 10%, and "does not hedge its exposure to foreign currencies."
The Tax Almost No Comparison Mentions
When a French or British or Australian company pays a dividend to a US fund, the company's home government generally takes a slice first. The fund receives what is left. None of that shows up in the expense ratio, none of it shows up in the SEC yield, and almost no comparison page puts a number on it. Schwab's audited accounts do.
Here is the line, verbatim, from SCHY's Statement of Operations for the year to 31 August 2025:
"Dividends received from securities - unaffiliated issuers (net of foreign withholding tax of $4,662,886) $42,205,364"
And the same line for SCHD, in the same filing, for the same twelve months:
"Dividends received from securities - unaffiliated issuers (net of foreign withholding tax of $134,020) $2,573,157,717"
| Fiscal year 1 Sep 2024 to 31 Aug 2025 | SCHD | SCHY |
|---|---|---|
| Dividends received, net of foreign tax | $2,573,157,717 | $42,205,364 |
| Foreign withholding tax | $134,020 | $4,662,886 |
| Gross dividends before foreign tax | $2,573,291,737 | $46,868,250 |
| Withholding as a share of gross dividends | 0.0052% | 9.95% |
| Management fee paid by the fund | $40,190,133 | $977,036 |
| Withholding versus the management fee | 0.003x | 4.8x |
| Foreign tax paid and passed through to shareholders | No such line | $3,616,625 |
| Gross income from foreign sources | No such line | $46,768,320 |
| Passed-through tax as a share of foreign income | Not applicable | 7.73% |
| Qualified dividend income | $2,469,946,295 | $36,826,727 |
| Ordinary income distributions, tax basis | $2,469,946,295 | $37,519,120 |
| Qualified share of ordinary income | 100.00% | 98.2% |
Three things in that table deserve a second look.
One. SCHY gave up nearly five times its own management fee to foreign tax authorities. The fee argument between 0.06% and 0.08% is real but small. This is an order of magnitude larger. The fund's accounts show its average net assets over the year were roughly $977m, derived from the $977,036 advisory fee and the report's note that the aggregate advisory fee paid was 0.10% for the period. On that base, the withholding ran at about 0.48% of assets and the amount actually passed through at about 0.37%, against a 0.08% expense ratio.
Two. The amount withheld and the amount passed through are not the same number. The fund reports $4,662,886 of withholding in the Statement of Operations and $3,616,625 of "Foreign Tax Paid and Passed Through" in the Statistics panel, a gap of $1,046,261. The report does not explain the difference, and we did not establish the reason. Some of it is likely timing between the fiscal year and the tax designation. We are not going to guess at the rest.
Three. SCHY does reclaim some of it. The financial notes say withholding is recorded as an expense "unless a tax withheld is reclaimable from the local tax authorities and there are no significant uncertainties on collectibility in which case it is recorded as receivable". SCHY carried a foreign tax reclaims receivable of $2,086,931 at 31 August 2025. So the 9.95% is already after the reclaims the fund expects to collect, not before them.
Now the part that determines whether any of this costs you money. Schwab publishes a document called "2025 Foreign Tax Credit Information", and its opening paragraph is the clearest statement of the mechanism you will find:
"If you are a shareholder of a fund listed in the table below, you may be entitled to either a federal foreign tax credit or an itemized deduction for a portion of the foreign taxes paid by the fund. The amount of credit or deduction to which you may be entitled is reported in Box 7 of Form 1099-DIV. Please refer to the IRS Form 1116 instructions regarding how to claim the federal foreign tax credit in your return. Only those funds electing to 'pass-through' the foreign tax credit are listed."
SCHY is on that list, with 2025 foreign source income of 100.00%. SCHD does not appear in the document at all, which is what you would expect of a fund that is 97.03% US-domiciled by weight.
Why the Account You Hold It In Matters Here
For most fund pairs the account question is a footnote. For this one it is close to the whole argument, and it runs the opposite way to the usual advice about dividend funds.
Follow the paperwork. IRS Publication 514 sets out who can claim the credit and how:
"If you are a shareholder of a mutual fund or other regulated investment company (RIC), you may be able to claim the credit based on your share of foreign income taxes paid by the fund if it chooses to pass the credit on to its shareholders. You should receive from the mutual fund or other RIC a Form 1099-DIV, or similar statement, showing your share of the foreign income and your share of the foreign taxes paid."
The same publication is explicit about whose credit it is: "You can claim a credit only for foreign taxes that are imposed on you by a foreign country or U.S. territory ... You cannot shift the right to claim the credit by contract or other means." And on the mechanics: "Unless you qualify for exemption from the foreign tax credit limit, you claim the credit by filing Form 1116 with your U.S. income tax return."
Now the other end of the chain. The IRS's own Instructions for Form 1099-DIV, the form that carries the Box 7 figure Schwab points you to, list the payees who do not get one:
"You are not required to report on Form 1099-DIV the following ... Payments made to certain payees. These include a corporation, tax-exempt organization, IRA, Archer MSA, health savings account (HSA), U.S. agency, state, District of Columbia, U.S. possession, or registered securities or commodities dealer."
Put the two together and the shape of the problem is plain. The credit is claimed by an individual, on an individual's return, on Form 1116, from a Box 7 figure on a Form 1099-DIV. An IRA is on the IRS's list of payees for whom no Form 1099-DIV is required, it files no Form 1040, and it claims no credit.
Be precise about what that does and does not prove. No IRS publication we pulled contains a single sentence saying "foreign withholding tax inside an IRA is lost". We searched Publication 514, the Form 1116 instructions and the Form 1099-DIV instructions for IRAs and retirement accounts; the only hit in the Form 1116 instructions is a footnote about OMB control numbers. What the primary sources establish is the mechanism above, not a blanket statutory rule. We also could not establish whether SCHY's custodian obtains any treaty relief on behalf of US retirement accounts in particular jurisdictions, because no filing we read breaks the reclaims down that way.
The practical consequence, stated as carefully as the sources allow:
- In a taxable brokerage account, SCHY's foreign tax is largely recoverable. Schwab elects to pass it through, reports it in Box 7, and the 2025 foreign source income figure for SCHY is 100.00%. The recovery is not automatic and not unlimited: Form 1116 caps the credit by reference to the US tax on your foreign-source income, so a high-income year with little other foreign income can leave part of it unused and carried forward.
- In an IRA, Roth IRA or 401(k), the reporting chain that delivers the credit does not exist. The dividends are sheltered from US tax, which is the usual reason to put a high-yield fund there, but the foreign tax was already taken at source before the shelter could do anything.
- This inverts the standard rule of thumb. The received wisdom is to hold high-yield dividend funds in tax-sheltered accounts, and for SCHD it holds. For SCHY it works against you: the very account that removes the US tax also removes your ability to claim back the foreign one.
- Do not read this as a reason to avoid international dividends. The same withholding applies to almost any fund holding foreign shares. It is an argument about which account, not about whether to own the asset.
| Hypothetical $100,000 held for one year | SCHD | SCHY |
|---|---|---|
| Expense ratio charged | $60 | $80 |
| Foreign tax withheld at the fund's own rate | about $0 | about $480 |
| Of which passed through as a credit | not applicable | about $370 |
This is educational information, not personalized investment or tax advice. Tax treatment depends on your own circumstances, past performance does not guarantee future results, and all investing carries the risk of loss. Check current figures with the issuer and speak to a licensed tax professional before acting on anything here.
SCHD vs SCHY Side by Side
| SCHD | SCHY | |
|---|---|---|
| Full name | Schwab U.S. Dividend Equity ETF | Schwab International Dividend Equity ETF |
| Index | Dow Jones U.S. Dividend 100 Index | Dow Jones International Dividend 100 Index (Net) |
| Inception | 20 October 2011 | 29 April 2021 |
| Expense ratio | 0.06% | 0.08% |
| Prospectus 10-year cost on $10,000 | $77 | $103 |
| SEC 30-day yield (25 Sep 2026) | 3.32% | 3.84% |
| Distribution yield, trailing 12 months (31 Aug 2026) | 3.00% | 3.34% |
| Net assets (28 Sep 2026) | $109.10bn | $2.56bn |
| Lines in the published holdings file (28 Sep 2026) | 102 | 144, of which 102 are equities |
| Top 10 weight (28 Sep 2026) | 41.56% | 40.30% |
| Largest single sector (28 Sep 2026) | Consumer Staples 20.05% | Industrials 15.29% |
| Weighted average market cap (31 Aug 2026) | $180.69B | $94.27B |
| Price / earnings (31 Aug 2026) | 19.57 | 15.17 |
| Price / book (31 Aug 2026) | 3.89 | 2.74 |
| Return on equity (31 Aug 2026) | 27.76% | 22.63% |
| 3-year standard deviation (31 Aug 2026) | 13.46% | 12.58% |
| Portfolio turnover (31 Aug 2026) | 39.60% | 29.16% |
| 30-day median bid-ask spread | 0.03% | 0.03% |
| Premium / discount (28 Sep 2026) | 0.01% | 0.40% |
| Distributions | Quarterly | Quarterly |
| Currency hedged | Not applicable | No |
| Exchange | NYSE Arca | NYSE Arca |
Two lines in that table are worth a sentence each. The premium and discount gap is structural, not a defect: European and Asian markets are closed while SCHY trades in New York, so its market price carries a view on where those shares will open. And the 144 lines against 102 equities simply reflects the currency and cash mechanics of an international fund. SCHY's file holds a money market fund at 0.17%, a zero-weight MSCI EAFE futures line and about forty cash and foreign-currency lines alongside its 102 stocks.
What Is Actually Inside Each Fund
Both sector tables below come from the two issuer holdings files published on the same day, using the same GICS sector column, summed line by line. Nothing here is a third party's classification.
| GICS sector | SCHD | SCHY |
|---|---|---|
| Consumer Staples | 20.05% | 15.14% |
| Health Care | 19.23% | 8.10% |
| Energy | 15.44% | 8.67% |
| Information Technology | 11.95% | 3.34% |
| Industrials | 11.26% | 15.29% |
| Financials | 9.17% | 14.92% |
| Consumer Discretionary | 6.73% | 7.41% |
| Communication Services | 5.99% | 14.30% |
| Utilities | 0.09% | 7.14% |
| Materials | 0.00% | 4.54% |
| Real Estate | 0.00% | 0.77% |
| Cash and unclassified | 0.08% | 0.39% |
| Lines in the file | 102 | 144 |
The 15% sector cap is doing visible work. SCHD's two largest sectors together are 39.28% of the fund; SCHY's two largest are 30.43%. SCHY also owns things SCHD does not own at all: 4.54% Materials, 7.14% Utilities and a 0.77% Real Estate sleeve that survives the REIT exclusion because those holdings are not REITs.
The technology gap runs the other way from what most people expect. SCHD, famously light on technology, still holds 11.95% of it. SCHY holds 3.34%. The ten-year dividend screen bites harder outside the US, where the large technology companies that clear it are fewer still.
| SCHY country weight | % | SCHY country weight | % | |
|---|---|---|---|---|
| France | 14.06 | India | 4.24 | |
| United Kingdom | 13.43 | Canada | 3.08 | |
| Australia | 9.62 | Spain | 3.04 | |
| Italy | 8.68 | Japan | 2.92 | |
| Switzerland | 8.27 | Finland | 2.88 | |
| Germany | 7.64 | Saudi Arabia | 2.15 | |
| Netherlands | 4.77 | Thailand | 1.60 | |
| Singapore | 4.69 | Brazil | 1.54 |
Japan at 2.92% is the number that surprises people who expect an international fund to look like a broad developed-markets index. It does not. Japanese dividend payers largely fail a ten-year consecutive-payment screen, so the fund leans on France, the United Kingdom and Australia instead. If you want broad international exposure weighted by market size, this is not that fund, and VTI vs VXUS covers the fund that is.
On the top of the book, the two funds are close to each other. SCHD's ten largest positions were 41.56% of the fund on 28 September 2026, led by Qualcomm at 4.64% and Texas Instruments at 4.59%. SCHY's ten largest were 40.30%, led by DHL at 4.17%, Eni at 4.15% and British American Tobacco at 4.12%. The 4.0% cap and the hundred-stock limit produce a similarly crowded top ten on both sides.
And there is no overlap. Matching the two holdings files on company name returns zero common positions. That is the one genuinely reassuring thing about owning both: whatever else is true, you are not buying the same companies twice.
What the Record Can and Cannot Show
SCHY began trading on 29 April 2021, tracking an index that launched on 22 March 2021. SCHD began on 20 October 2011. There is no ten-year comparison here, and there will not be one until 2031. Anything you read comparing these two over a decade is comparing SCHD against back-tested index history, not against a fund anyone could have owned.
What can be compared honestly is the period both funds have existed. Both tables below are the issuer's own, on the same dates, at NAV.
| Annualized at NAV, as of 31 August 2026 | 1 year | 3 years | 5 years | 10 years |
|---|---|---|---|---|
| SCHD | 29.45% | 16.18% | 10.01% | 13.17% |
| SCHY | 22.94% | 16.77% | 9.06% | no record |
| SCHD minus SCHY | +6.51 | -0.59 | +0.95 | not comparable |
Read that honestly and it says very little. Over three years the international fund is ahead; over one and five years the US fund is ahead; the five-year gap is under a point a year. A five-year window that starts in mid-2021 contains one inflation shock, one rate cycle and a large move in the dollar. It is not enough history to establish that either screen is better, and neither issuer offers an attribution that would tell you why the numbers came out this way.
The after-tax picture is more interesting, and more ambiguous than we would like.
| Annualized at NAV, as of 30 June 2026 | 1 year | 3 years | 5 years | 10 years |
|---|---|---|---|---|
| SCHD before taxes | 24.08% | 13.52% | 8.51% | 12.37% |
| SCHD after taxes on distributions | 22.68% | 12.42% | 7.54% | 11.45% |
| SCHD difference | 1.40 | 1.10 | 0.97 | 0.92 |
| SCHY before taxes | 20.81% | 14.65% | 8.42% | no record |
| SCHY after taxes on distributions | 19.51% | 13.63% | 7.59% | no record |
| SCHY difference | 1.30 | 1.02 | 0.83 | no record |
| SCHD "Tax Cost Ratio", Schwab's own line | 1.45 | 1.28 | 1.21 | 1.05 |
| SCHY "Tax Cost Ratio", Schwab's own line | 1.49 | 1.72 | 1.55 | no record |
These two measures disagree about which fund is more tax-efficient, and we are not going to pick a side. Subtracting the SEC after-tax row from the before-tax row makes SCHY look marginally better at every horizon. Schwab's own Tax Cost Ratio line ranks it the other way, 1.55 against 1.21 over five years. We could not reconcile the Tax Cost Ratio with the two return rows by any obvious formula, and Schwab does not publish its definition on the fund page. We also could not establish whether the SEC after-tax calculation for SCHY reflects any benefit from the foreign tax credit. Both figures are printed above because both are the issuer's; neither settles the question.
What is not ambiguous is the qualified dividend split. In the year to 31 August 2025, 100.00% of SCHD's ordinary income distributions were qualified dividend income, taxed at long-term capital gains rates for holders who meet the holding-period rules. SCHY's figure was 98.2%. Both are high, and on this measure the two funds are close. If you want the full mechanics, our guide to how dividends are taxed covers the holding-period test.
Which One Fits You
This is not a choice between two funds. They hold no companies in common, one is US and one is not, and the honest framing is whether you want an international dividend sleeve at all, and if so where to put it. Treating SCHY as a substitute for SCHD is the one clear mistake available here.
If you hold SCHY, prefer a taxable account. That is the opposite of the standard advice for high-yield funds, and it follows from one fact: Schwab elects to pass the foreign tax credit through, reports it in Box 7 of your Form 1099-DIV, and reported SCHY's 2025 foreign source income as 100.00%. A taxable account is where that Box 7 figure can be used. This is the single most actionable thing on the page.
If you hold SCHD, the old rule still applies. Its income is 100% qualified and it pays essentially no foreign tax, so the argument for sheltering it is the ordinary one: a 3.32% yield in a taxable account generates a tax bill whether or not you spend the cash. We work through that trade in SCHD vs VTI.
Owning both is coherent, and the split is a real decision. There is no overlap to worry about, the sector profiles are close to complementary, and the two funds are built on the same dividend philosophy even though the rules differ. What you are choosing is a home-country weighting, and the drag in the table above is a reason to keep the international sleeve in the account where the credit is usable.
SCHY is the better diversifier of the two, by construction. A 15% sector cap, a 15% emerging markets cap, a country-size screen and a volatility screen produce a flatter portfolio than SCHD's, which runs 20% Consumer Staples and 19% Health Care. If a smoother sector profile is what you want from a dividend fund, that is a defensible reason to prefer SCHY's rules, independent of geography.
Do not choose on the five-year numbers. Under a point a year separates them over five years, the sign flips at three, and SCHY has no cycle-length record at all. Anyone presenting this as settled is presenting noise.
If what you want is simply international exposure, this is not the default. A hundred stocks chosen for dividend history, low volatility and financial ratios is a specific bet, with Japan at under 3% and technology at 3.34%. For a market-weighted international core, see VT vs VXUS. If the appeal is the income rather than the geography, DIVO vs SCHD and VYM vs SCHD cover the US alternatives.
Sources & Methodology
Every figure on this page was read from the issuer's own filing or fund page, the index provider's own rulebook, or an IRS publication. None of it came from a secondary summary or another comparison site.
- Schwab Strategic Trust, Form 485BPOS filed 22 December 2025: the statutory prospectus carrying both fund summaries. SCHY's 0.08% fee table and $103 ten-year cost example, SCHD's 0.06% fee table and $77 example, both index descriptions, the 80% and 90% investment policies, the sampling and currency-hedging language, the portfolio turnover figures, the distribution schedules, the inception dates, and the tax section quoted above. Both fee tables were anchored on the fund summary headings, not the contents listings.
- Schwab Strategic Trust, Form N-CSR for the fiscal year ended 31 August 2025: the audited Statements of Operations for both funds, including the foreign withholding tax lines of $4,662,886 and $134,020; SCHY's Statement of Assets and Liabilities and its $2,086,931 foreign tax reclaims receivable; the annual report Statistics panels carrying SCHY's $3,616,625 foreign tax passed through, $46,768,320 gross income from foreign sources and $36,826,727 qualified dividend income, and SCHD's $2,469,946,295 qualified dividend income; and the federal income tax notes giving each fund's ordinary income distributions.
- Schwab Asset Management, SCHY fund page and SCHD fund page: net assets, holdings counts, SEC 30-day yields, distribution yields, bid-ask spreads, premiums and discounts, portfolio characteristics, turnover, and the monthly, quarterly and after-tax return tables.
- Schwab Asset Management, 2025 Foreign Tax Credit Information: the pass-through language quoted in full, SCHY's 100.00% foreign source income, and the absence of SCHD from the list.
- Schwab Asset Management published holdings files, SCHD and SCHY, both as of 28 September 2026: every sector weight, country weight, top-ten weight and overlap test was computed by summing those two files directly.
- S&P Dow Jones Indices, Dow Jones Dividend Indices Methodology, September 2026: every quoted index rule for both indices, including the two universes, the entry screens, the yield cuts, the composite scores, the volatility screen, the buffers, the 4.0% stock cap, the 25% and 15% sector caps, the 15% emerging markets cap, the daily weight cap check and the March reconstitution.
- S&P Dow Jones Indices, Dow Jones International Dividend 100 Index: the index description and its 22 March 2021 launch date.
- IRS Publication 514 (2025), Foreign Tax Credit for Individuals: the mutual fund shareholder rule, the requirement that the tax be imposed on you, and the Form 1116 filing requirement.
- IRS Instructions for Form 1099-DIV: Box 7 as the foreign tax paid box, and the exceptions list naming an IRA among the payees for whom no Form 1099-DIV is required.
- IRS Instructions for Form 1116: searched for any treatment of IRAs and retirement accounts, with the result reported below.
What we could not verify, stated rather than guessed. No IRS publication we pulled addresses foreign tax withheld inside an IRA in a single sentence; the account point on this page is assembled from the reporting mechanism in Publication 514 and the Form 1099-DIV instructions, and is presented as such. We could not establish why SCHY's Statement of Operations shows $4,662,886 of withholding while its Statistics panel shows $3,616,625 passed through, a gap of $1,046,261; the report does not explain it. We could not reconcile Schwab's published Tax Cost Ratio with the difference between its own before-tax and after-tax return rows, which rank the two funds in opposite directions, so both are printed and neither is treated as decisive. We could not establish whether the SEC standardized after-tax figures for SCHY reflect any foreign tax credit. We did not pull S&P DJI's country classification list, so the roughly 14.8% emerging-markets figure is our own grouping of the issuer's country codes rather than the index provider's classification. SCHY's average net assets for fiscal 2025 are derived from the advisory fee paid and the reported 0.10% aggregate rate, so figures expressed as a percentage of assets are approximate. No SEC-standardized return table later than 31 December 2024 exists on EDGAR for either fund, which is why the return tables here come from the issuer's fund pages. Neither issuer attributes any part of the return gap to currency, sector positioning or the volatility screen, so nothing here claims a measured attribution.
This article is for general education and is not investment, tax or legal advice. Fund data changes daily, index returns are unmanaged and cannot be invested in directly, tax treatment depends on your own circumstances, and past performance does not guarantee future results. All investing carries the risk of loss. Check current figures with the issuer and consider speaking with a licensed financial or tax professional before making a decision.
FAQ: SCHD vs SCHY
Is SCHY just SCHD for international stocks?
No. The two indices share a ten-year dividend requirement, the same four ranking ratios and a 4.0% single-stock cap, and then diverge. SCHY's index runs a volatility screen that discards half of the 400 finalists, caps each sector at 15% instead of 25%, caps emerging markets at 15%, and applies a country-size screen. SCHD's index has none of those. The fund policies differ too: SCHD replicates its index and commits 90% of net assets to it, SCHY samples and commits 80%.
How much does SCHY lose to foreign withholding tax?
In the fiscal year to 31 August 2025 its audited accounts show $4,662,886 of foreign withholding tax against $42,205,364 of dividends received, which is 9.95% of the gross. That is about 4.8 times the fund's own management fee for the year. SCHD's equivalent figure was $134,020 on $2.57bn of dividends, or 0.0052%.
Can I get the foreign tax back?
In a taxable account, generally much of it. Schwab elects to pass the credit through, reports the amount in Box 7 of your Form 1099-DIV and listed SCHY's 2025 foreign source income as 100.00%. You claim it on Form 1116 with your own tax return, subject to a limitation based on the US tax on your foreign-source income. Whether you recover the full amount depends on your own situation, and this is a question for a tax professional.
Is SCHY a bad idea inside an IRA?
The credit mechanism does not reach an IRA. IRS Publication 514 says the credit is claimed on Form 1116 with your income tax return, based on a Form 1099-DIV showing your share of foreign taxes paid, and the IRS's Form 1099-DIV instructions list an IRA among the payees for whom no such form is required. No IRS publication we pulled says in one sentence that the withholding is lost, so treat this as the reporting mechanism rather than a statutory rule, and ask a tax professional about your own account.
Which is cheaper, SCHD or SCHY?
SCHD, at 0.06% against 0.08%, both read from the fund summary fee tables in the same prospectus. Over ten years on $10,000 the prospectus cost examples are $77 and $103. Schwab cut SCHY's management fee from 0.14% to 0.08% on 28 February 2025, so older comparisons quoting 0.14% are out of date.
Which yields more?
SCHY, at a 3.84% SEC 30-day yield against SCHD's 3.32%, both as of 25 September 2026. On the trailing twelve-month distribution yield as of 31 August 2026 it was 3.34% against 3.00%. Remember that the SEC yield is measured after the foreign tax has already been withheld.
Do SCHD and SCHY hold any of the same companies?
No. Matching the two published holdings files on company name, both as of 28 September 2026, returns zero common positions. SCHD is 97.03% US-domiciled by weight; SCHY's index universe is explicitly ex-US.
Has SCHY beaten SCHD?
It depends entirely on the window, and no window is long. At NAV to 31 August 2026, SCHD returned 29.45% over one year against SCHY's 22.94% and 10.01% over five years against 9.06%, while SCHY led over three years, 16.77% against 16.18%. SCHY launched on 29 April 2021, so there is no ten-year comparison and will not be one until 2031.
Why does SCHY hold so little Japan and so little technology?
Both follow from the ten-year consecutive-dividend screen and the volatility screen. Japan was 2.92% of the published holdings file on 28 September 2026 and Information Technology was 3.34%, against France at 14.06% and the United Kingdom at 13.43%. Companies that pay uninterrupted dividends for a decade and rank well on four financial ratios are concentrated in a handful of European and Australian markets.
Cite This Page
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"SCHD vs SCHY: The International Sibling Follows a Different Rulebook." Wealthy Pot, 2026. https://wealthypot.com/schd-vs-schy/
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