SCHD vs JEPI: Which Should You Pick?
JEPI's SEC yield is twice SCHD's, yet from May 2020 to Sept 2026 SCHD returned 14.3% a year to JEPI's 10.5%. Fees, taxes, option income, and a third choice.
SCHD and JEPI are the two income ETFs most often compared, and they produce their payouts in different ways. SCHD holds about 100 U.S. stocks picked by an index for long dividend records and strong balance sheets. JEPI is an actively managed stock portfolio that also sells S&P 500 call options through equity-linked notes and pays out the premiums monthly. Its yield is more than twice SCHD’s, and since JEPI launched in May 2020 its total return has been lower.
Quick answer
For most investors who want income, neither. A broad index fund plus a plan to sell shares as needed delivers the same cash with more diversification and, in a taxable account, less tax. If you want one of these two anyway, SCHD is the better holding: it costs 0.06% against JEPI’s 0.35%, nearly all its dividends were qualified in 2025, and it keeps the stock market’s upside. From May 2020 to September 2026, $10,000 grew to $23,345 in SCHD, $18,794 in JEPI and $26,686 in the total-market VTI.
| SCHD | JEPI | |
|---|---|---|
| Expense ratio | 0.06% | 0.35% |
| Strategy | Index: Dow Jones U.S. Dividend 100 | Active stocks plus up to 20% in call-selling notes |
| Holdings | 102 | 136 |
| 30-day SEC yield | 3.36% (Oct 6, 2026) | 7.45% (Sept 30, 2026) |
| Payouts | Quarterly | Monthly |
| Dividends qualified | 98.5% (2025) | About 16% (year to June 2026) |
| Annual return, May 2020 to Sept 2026 | 14.32% | 10.48% |
| Volatility | 15.2% | 10.1% |
| Worst decline in that window | 16.8% (2022) | 13.7% (2022) |
Schwab and J.P. Morgan product pages, fact sheets, prospectuses and annual reports, read October 2026. Returns are Summitward calculations from daily total-return prices, May 29, 2020 to September 30, 2026.
Where the payouts come from
SCHD’s index starts from the 2,500 largest U.S. stocks, drops REITs and anything without ten straight years of dividends, keeps the higher-yielding half, and then ranks the rest on cash flow to debt, return on equity, dividend yield and five-year dividend growth. The top 100 make the cut, with caps of 4% per stock and 25% per sector. The result is a value-tilted fund: at June 30, 2026, health care, consumer staples and energy were 55% of it. Its payout is the dividends those companies pay.
JEPI’s prospectus describes two parts: an actively managed portfolio of stocks, and up to 20% of assets in equity-linked notes that sell call options on the S&P 500. The fund pays out the note income and its stock dividends monthly, aiming to keep the payment “at a relatively stable level.” A February 2026 supplement added that the fund may use futures, mainly to put its cash to work in the market.
Selling a call is selling the market’s upside for cash today. Israelov and Nielsen’s summary of covered calls is one fact: “Covered calls provide long equity and short volatility exposure.” They list “covered calls generate income” among the myths: the premium is payment for taking on a liability, and it is income only if the option was overpriced. The SEC’s August 2026 investor bulletin puts the general point plainly: “A fund’s distributions are not the same as performance.”
What the record shows
From JEPI’s first month-end, May 29, 2020, to September 30, 2026, SCHD returned 14.32% a year, JEPI 10.48% and VTI 16.76%. JEPI captured 53% of VTI’s gains in rising months and 59% of its losses in falling ones, measured on compounded returns (the Morningstar convention); SCHD captured 73% of both. On simple monthly averages JEPI’s figures are 59% and 55%. Either way, JEPI took about as large a share of the losses as of the gains: its smaller declines came at nearly the same price in rising months.
Year by year the picture differs. JEPI beat SCHD in 2023, 2024 and 2025. SCHD’s lead over the whole window comes from the second half of 2020 (ahead by about 10 points), 2021 (8.4 points) and 2026 so far (about 18 points). JEPI was also steadier: 10.1% annualized volatility against 15.2%, and a 13.7% worst decline in 2022 against SCHD’s 16.8%. Six years is a short record for either fund.
Taxes decide it in a brokerage account
Schwab reports that 98.5% of SCHD’s 2025 dividends were qualified, taxed at 0%, 15% or 20%. JEPI’s annual report shows $552 million of qualified dividends in the $3.41 billion it paid out in its fiscal year to June 30, 2026, about 16%. The rest is taxed as ordinary income. An investor in the 24% bracket, paying 15% on qualified dividends, keeps about 77 cents of each JEPI dollar against about 85 cents of each SCHD dollar, before any state tax, and pays it every year whether or not they spend the cash. In an IRA, JEPI’s ordinary-income payouts cost no extra tax; the fee and the capped upside still apply.
The case for each
For SCHD: a low fee, a transparent rule, quality screens that drop weak dividend payers, and dividends that are nearly all qualified. Our SCHD guide explains why we still prefer a total-market core: the dividend screen is an indirect route to value and profitability, it leaves out companies that return cash through buybacks, and the yield creates taxable income every year whether or not you need it.
For JEPI: lower volatility, smaller drawdowns, and a predictable monthly payment that some retirees find easier to live on than selling shares. If that comfort keeps you invested through a crash, it has real value. Hold it in an IRA, and size it knowing you are giving up part of the stock market’s return for that steadiness. Our covered call guide covers the option math, and why dividends are not free money covers the yield illusion for both funds.
See what a high payout does to your balance
A fund that pays out more than it earns shrinks the balance you are drawing on. Set the payout rate and total return below to see how the cash you receive compares with what is left.
Who should pick which
Pick SCHD if you
- Want dividend stocks specifically and accept the sector tilt.
- Hold it in a taxable account, where qualified dividends matter.
- Want to keep the market’s upside.
Pick JEPI if you
- Hold it in an IRA, where its ordinary-income payouts are not taxed yearly.
- Value a steady monthly payment over total return.
- Accept trailing a plain stock fund in strong markets.
Most investors are better served by neither: a total-market fund such as VTI, with shares sold on a schedule for spending. Our safe withdrawal rate guide covers that route.
Sources and related reading
- Schwab Asset Management, SCHD product page (October 2026) and 2025 qualified dividend table; S&P Dow Jones Indices, Dow Jones Dividend Indices Methodology (September 2026).
- J.P. Morgan, JEPI product page (October 2026), summary prospectus (November 1, 2025), February 27, 2026 prospectus supplement, and annual report for the year ended June 30, 2026, all on SEC EDGAR.
- Roni Israelov and Lars Nielsen, “Covered Call Strategies: One Fact and Eight Myths”, Financial Analysts Journal 70(6), 2014.
- U.S. Securities and Exchange Commission, Investor Bulletin: Fund Distributions (August 19, 2026).
- Why I avoid SCHD, covered calls are not free income, and dividends are not free money.
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