Rise of Tech Dividends a Boon for Funds

By Todd Shriber, ETF Trends

For years, technology was the not first sector investors thought of when they thought of dividends. The largest sector weight in the S&P 500 is changing that and that change has been a boon for an array of exchange traded funds.

Tech’s rise as a credible dividend destination is nothing short of impressive. “In December 2003, just 22 IT stocks paid a dividend. That’s jumped to about 45 in July of this year,” reports Bryan Borzykowski for CNBC.

The conservative dividend posture of more mature tech companies helped the sector and some Exchange Traded Funds remain durable even as Internet and social media offerings swooned earlier this year. Although stocks from those industries have bounced back, it is the tech ETFs heavy on older stocks that pay dividends that have stood out this year.

The average dividend increase from Apple, IBM, Cisco and Qualcomm this year is almost 14%. Microsoft’s last two dividend increases were 21.7% and 15%, respectively.

Tech dividend growth should be good news for the First Trust NASDAQ Technology Dividend Index Fund (TDIV).

Investors have embraced the ETF in a big way this year, sending it up 12.3% while plowing almost $268 million into the fund. That is 44% of the ETF’s current assets under management total.

TDIV tracks the NASDAQ Technology Dividend Index, which has a dividend yield of 3.3%. That is well above what investors normally expect of the tech sector and that yield comes by virtue of a mandate that states the index hold at least 20% of its weight in telecom stocks.

So while TDIV offers leverage to the dividend growth of companies like Apple and Microsoft, it is also features the decades-long dividend growth steady payers like AT&T (NYSE: T) and Verizon (NYSE: VZ).

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First Trust NASDAQ Technology Dividend Index Fund (TDIV) is a component of the D2 Capital Management Multi-Asset Income Portfolio.  Current dividend yield of the portfolio is 5.36% (as of 24 July 2014).  Year-to-date the portfolio is up 11.50%.

Disclosure:  I own & manage the D2 Capital Management Multi-Asset Income Portfolio

The views expressed here are that of myself or the cited individual or firm and do not constitute a recommendation, solicitation, or offer by myself, D2 Capital Management, LLC or its affiliates to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. D2, its clients, and its employees may or may not own any of the securities (or their derivatives) mentioned in this article.

 The Jacksonville Business Journal has ranked D2 Capital Management in the top 25 of Certified Financial Planners in Jacksonville.  The Firm is also a member of the Financial Planning Association of Northeast Florida, the Jacksonville Chamber of Commerce, the Southside Businessmen's Club, and the Beaches Business Association.