The Temptation of Technology Dividends

By Todd Shriber, ETF Trends

Another year of low interest rates has, once again, sent investors flocking to dividend funds.

But many dividend funds sacrifice exposure to future sources of dividend growth, such as the technology sector, in favor of sectors’ past dividend track records. Hence, the often substantial overweights to consumer staples and utilities and relatively thin exposure to tech in equity income funds.

The ascent of tech dividends has created a captive audience for exchange traded funds like the First Trust NASDAQ Technology Dividend Index Fund (TDIV). TDIV has soared in popularity as the technology has progressively become a more legitimate and attractive dividend destination over the past several years. TDIV has added $406.1 million of its $744.4 million in assets under management this year.

While the concept of dividend growth in the tech sector is still relatively new, that does not mean it will not prove rewarding for investors. The sector is one of largest contributors to S&P 500 dividend growth over the past few years.

Because the information technology sector’s dividend growth rate has exceeded all other sectors over the past 3, 5, and 10 years and the sector currently pays more dividends than any other sector in the S&P 500 Index,” according to First Trust Senior Vice President and ETF Strategist Ryan Issakainen.
The average payout increase from Apple, IBM (IBM), Cisco (CSCO) and Qualcomm (QCOM) this year is almost 14%.

Interestingly, “roughly half the dividend-paying technology stocks in the S&P 500 offer higher dividend yields than that of the S&P 500 Index,” notes Issakainen.

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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 yield on the portfolio is 4.93% and year to date the portfolio is up 8.28% (as of 14 November 2014).

Disclosure:  I own 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.