Dividend ETF Prices Move Together. Their Payouts Usually Don't.
Dividend ETF Prices Move Together. Their Payouts Usually Don't.
In our last analysis, we counted every payment five dividend ETFs made from 2014 through 2025. SCHD raised its payout fastest. SDY, whose index requires the longest dividend-increase records of the five, cut its distribution twice.
That leaves an income investor with a problem: you can't know in advance which fund will cut. So we asked a different question. If you held several of these funds instead of one, how steady was the combined paycheck?
Our correlation analysis found that dividend ETFs' prices move closely together, so holding several adds less diversification than it seems. Their payouts behaved differently. Holding three or more removed every down year from 2014 to 2025. Then we went back to 2009 and found where that protection stops.
How We Built the Mixes
We used the same data as our previous analysis: every quarterly distribution from VIG, SDY, SCHD, VYM, and DVY from 2014 through 2025, grouped by ex-dividend date, with SCHD adjusted for its 2024 share split. You can download the data.
Each mix is defined by its income, not its dollars: every fund in the mix supplies an equal share of the first year's income. That's how an income investor builds a paycheck. Distributions are spent, not reinvested, and no new money is added, so the mix's income each year depends only on what the funds actually paid.
One consequence to keep in mind: an equal income share puts more dollars into lower-yielding funds. VIG, the lowest yielder, gets the largest dollar amount. We test other splits later.
We tested all 31 possible combinations of the five funds.
The Payouts Barely Moved Together
Here is the correlation between each pair of funds' year-to-year payout changes (+1 means they rise and fall together, 0 means no relationship):
| Pair | Correlation |
|---|---|
| VIG–VYM | +0.44 |
| VYM–DVY | +0.44 |
| VIG–DVY | +0.11 |
| SCHD–SDY | +0.11 |
| VYM–SDY | +0.06 |
| VIG–SCHD | +0.04 |
| VIG–SDY | +0.01 |
| VYM–SCHD | -0.16 |
| SCHD–DVY | -0.16 |
| SDY–DVY | -0.40 |
The average across all ten pairs is +0.05.
A caution before reading too much into any single number: each correlation rests on only eleven annual changes, so none of them is statistically distinguishable from zero, and the two +0.44 pairs are a moderate relationship, not none. Part of the low correlation may also come from timing noise. A fund that pays an unusually large December distribution and a small one the following March will show a jump and then a drop that have nothing to do with the other funds.
The pattern is consistent with the funds' weakest years:
| Fund | Weakest Payout Year | Change That Year |
|---|---|---|
| VIG | 2016 | +0.38% |
| SDY | 2017 | -6.10% |
| DVY | 2020 | -2.18% |
| SCHD | 2023 | +3.77% |
| VYM | 2025 | +0.18% |
Five funds, five different weakest years.
The Five-Fund Mix Never Had a Down Year
Use the mix builder below to see each fund's year-to-year payout change alongside the combined mix. Toggle funds on and off to build your own combination, or switch to the 2008–2011 stress test.
Build Your Own Dividend ETF Income Mix
Pick any combination of funds. Each one supplies an equal share of first-year income, and distributions are spent. Switch to 2008–2011 to see what happened when dividends fell everywhere at once.
| Fund | Payout growth / yr | Years payout fell | Worst year | Year-to-year swing |
|---|---|---|---|---|
| VIG | 7.63% | 0 | +0.38% | 4.42 |
| SDY | 6.67% | 2 | -6.10% | 7.31 |
| SCHD | 10.51% | 0 | +3.77% | 4.77 |
| VYM | 5.67% | 0 | +0.18% | 3.85 |
| DVY | 7.15% | 1 | -2.18% | 3.55 |
| Your mix (VIG + SDY + SCHD + VYM + DVY) | 7.65% | 0 | +4.71% | 2.32 |
Swing is the population standard deviation of annual payout changes, in percentage points. SCHD and DVY are not available for 2008–2011 in this dataset. Historical data only; not a forecast.
| Payout Growth per Year | Years the Payout Fell | Worst Year | Year-to-Year Swing* | |
|---|---|---|---|---|
| SCHD | 10.51% | 0 | +3.77% | 4.77 |
| VIG | 7.63% | 0 | +0.38% | 4.42 |
| DVY | 7.15% | 1 | -2.18% | 3.55 |
| SDY | 6.67% | 2 | -6.10% | 7.31 |
| VYM | 5.67% | 0 | +0.18% | 3.85 |
| Five-fund mix | 7.65% | 0 | +4.71% | 2.32 |
*Population standard deviation of the annual payout change, in percentage points. Lower means a steadier paycheck.
The mix's income rose every year from 2015 through 2025. Its worst year was a 4.71% raise, better than the worst year of every individual fund, including SCHD. Its year-to-year swing was the lowest of all 31 combinations we tested.
A mix is normally expected to land in the middle of its parts. On growth, it did: 7.65% a year, close to the 7.53% average of the five funds. On its worst year, it landed above all of them, because each fund's bad year was cushioned by the other four having ordinary years.
Two Things Made It Work
This result depended on two conditions, and it's worth separating them.
First, payouts almost always rose. Across the five funds and eleven years, the payout fell in only 3 of 55 fund-years. That was a strong decade for dividends, and it gave the mixes a lot of room.
Second, the bad years didn't line up. To test how much that mattered, we rearranged each fund's own eleven annual changes so that every fund's worst year landed in the same year, then its second-worst, and so on. Same funds, same changes, different timing. In that version, 7 of the 10 three-fund mixes had a down year. In the actual data, none did.
So the timing was doing real work. The same payout changes, arriving together, would have produced pay cuts.
From 2014 to 2025, Any Three Funds Was Enough
| Funds in the Mix | Combinations | Combinations With a Down Year | Range of Worst Years | Range of Payout Growth |
|---|---|---|---|---|
| 1 | 5 | 2 | -6.10% to +3.77% | 5.67% to 10.51% |
| 2 | 10 | 2 | -0.79% to +5.55% | 6.18% to 9.16% |
| 3 | 10 | 0 | +1.84% to +4.66% | 6.52% to 8.53% |
| 4 | 5 | 0 | +3.54% to +4.61% | 6.81% to 8.10% |
| 5 | 1 | 0 | +4.71% | 7.65% |
In this period, every combination of three or more funds raised its income every year. Only two of the ten pairs had a down year, and both included SDY.
One hindsight warning: the best combination of all was a pair, SCHD + DVY. Its worst year was a 5.55% raise and its income grew 8.96% a year, beating the five-fund mix on both. But it was identified after the fact, from the same data. A table of 31 combinations will always contain a winner. The reliable pattern is the one across all the three-fund mixes, not the single best pair.
Does the Exact Split Matter?
The mixes above use equal income shares. To see whether that choice drives the result, we drew 100,000 random income splits across the five funds, sampled evenly over every possible split:
| Weighting | Share With Any Down Year | Worst Possible Split |
|---|---|---|
| Completely random (a fund can be near 0% or near 100%) | 5.08% | -6.10% (all SDY) |
| Every fund between 10% and 60% of income | Under 0.05% | -0.86% (60% SDY) |
When the split was unconstrained, about one mix in twenty had a down year. Those were the mixes concentrated in one or two funds. When every fund held at least a 10% share, down years almost disappeared: only a few mixes in ten thousand had one. Even the worst possible split within those limits, 60% in SDY, had a single dip of 0.86%.
The exact split mattered much less than avoiding concentration.
Does It Hold in Other Periods?
| Period | Worst Year, Five-Fund Mix | Best Single Fund's Worst Year | Three-Fund Mixes With a Down Year |
|---|---|---|---|
| 2014–2019 | +4.71% | SCHD, +6.96% | 0 of 10 |
| 2019–2025 | +5.19% | VIG, +5.29% | 0 of 10 |
| 2016–2025 | +4.90% | VIG, +4.72% | 0 of 10 |
The five-fund mix did not beat every single fund in every window. In 2014–2019, SCHD alone had a clearly better worst year (+6.96% versus +4.71%). In 2019–2025, VIG's was slightly better. In each case, though, the mix had a lower year-to-year swing than that fund, and the fund with the best record changed from window to window.
In every window, no three-fund mix had a down year.
The Test That Matters: 2009
Every result above comes from a period with no broad dividend recession. The obvious objection is that mixing only looks good because nothing went wrong everywhere at once.
So we went back. Four of the five funds existed through the 2008–2009 financial crisis; only SCHD, launched in 2011, did not. Our data source has no DVY records before 2011, so we tested VIG, VYM, and SDY, using the same method (data):
| 2008 | 2009 | 2010 | 2011 | |
|---|---|---|---|---|
| VIG | +17.53% | -4.58% | +7.05% | +11.83% |
| VYM | +6.34% | -19.06% | -6.59% | +21.63% |
| SDY | +12.03% | -21.45% | +0.54% | -0.21% |
| Three-fund mix | +11.96% | -14.79% | +0.95% | +10.87% |
In 2009, every fund cut its payout, and the mix fell 14.79%. When companies across most sectors cut dividends at the same time, the funds' payouts fell together, and there was nothing for the mix to offset.
Mixing still helped in a narrower way. The mix fell less than VYM or SDY. But VIG alone fell only 4.58%, so a single well-chosen fund beat the mix in the year that mattered most.
That defines what this kind of diversification did in our data. From 2014 to 2025, it cushioned one fund's problems: an index reshuffle, a sector tilt, an unusually large payment that didn't repeat. In 2009, it did not protect against a market-wide dividend recession. Protection against that kind of year may need to come from outside dividend stocks, such as a cash reserve or a spending plan that can absorb a lower year. (Our bond analysis found that which bonds help depends heavily on the type of downturn.)
What It Cost
In hindsight, SCHD alone beat the five-fund mix on growth by a wide margin from 2014 to 2025: 10.51% a year against 7.65%. Its own worst year was also a raise.
The trade-off is this: mixing gave up the chance of picking the best fund in exchange for reducing the risk of picking the worst one, at least in a period of fund-specific rather than market-wide cuts. From 2014 to 2025, the worst one turned out to be SDY. In hindsight, its design made an uneven payout more likely. Its index weights holdings by yield and reshuffles them annually, and its 2017 decline partly reversed an unusually large payment at the end of 2016 ($0.778, against $0.629 a year later).
Whether the trade is worth it depends on what the income is for. If you're reinvesting for decades, a single weak year matters little. If the distributions pay your bills, a year when the paycheck shrinks is exactly what you're trying to avoid. (We looked at that spending case in our analysis of whether living on dividends removes sequence risk.)
A Smaller Bonus: Smoother Quarters
Most of these funds pay their largest distribution in the fourth quarter. DVY is the exception lately: its largest payment came in the third quarter in six of the eight years since 2018. Pairing it with a fourth-quarter-heavy fund evens out the quarters:
| Gap Between Largest and Smallest Quarter* | |
|---|---|
| SDY alone | 32.8% |
| VYM alone | 30.1% |
| VIG alone | 25.4% |
| DVY alone | 25.2% |
| SCHD alone | 24.4% |
| Five-fund mix | 23.0% |
| SCHD + DVY | 19.5% |
| VIG + DVY | 18.5% |
*Average across 2014–2025, as a percentage of an average quarter's payment.
For the five-fund mix the improvement is small, 23.0% against 24.4% for SCHD alone. The bigger gains come from specific pairs, which again were picked from this same data. VIG + DVY left the quarters about a quarter more even than holding VIG, DVY, or SCHD alone.
Why the Payouts Diverge
Prices of these funds move together because they react to the same market. Their payouts depend on what each index holds, and the indexes are built differently. DVY weights its holdings by dividends paid and SDY by yield, while VIG, VYM, and SCHD weight by market value. Each also applies its own selection rules, and DVY leans heavily toward utilities and financials. Differences like these may explain why each fund's weak years fell in different places, though our data can't prove the cause.
What This Analysis Doesn't Capture
Income shares, not dollar shares. The main tables give each fund an equal share of first-year income. The random-split test varies income shares, not dollar amounts. We did not compute an equal-dollar portfolio, which would give higher-yielding funds a larger share of the income.
A limited stress test. The 2008–2011 test covers only three of the four funds that existed then, uses a single data source without a second-source cross-check, and the main test covers one strong decade for dividends.
Spending, not reinvesting. Distributions are spent each year. Reinvesting would compound income growth, though not change when each fund cut.
Total return isn't measured here. As our previous article showed, the fund with the fastest payout growth wasn't the one with the highest total return.
Small samples. Each correlation rests on eleven annual changes.
No taxes or fees beyond the funds' own expense ratios.
The Bottom Line
From 2014 through 2025, five dividend ETFs' payouts rose and fell with little relationship to each other, and their weak years landed at different times. In that period, every combination of three or more funds raised its income every year, and the five-fund mix's worst year was a 4.71% raise, better than any single fund's worst year. Had the same changes arrived together, 7 of 10 three-fund mixes would have had a down year.
In 2009, they did arrive together. Every fund cut its payout, and the three-fund mix fell 14.79%.
From 2014 to 2025, owning several dividend ETFs cushioned the paycheck against single-fund problems. In 2009, it didn't protect against a year when dividends fell everywhere. That year needs its own plan.
Sources: Distribution history from dividendhistory.org, cross-checked against StockAnalysis for 2021–2025 (the 2007–2011 figures are single-source). Data used in this analysis: dividend-etf-distributions-2014-2025.csv and dividend-etf-distributions-2007-2011.csv.