ETF Trends
ETF Trends

Dividend payouts are becoming more commonplace with information technology stocks according to S&P Capital. There has been an 18.9% increase in the amount of dividend paying companies within the particular sector, making a case for investing in technology exchange traded funds for income.

“Part of the attraction to technology names in general is the cyclicality of the companies. If the economy is in the early stages of an upswing, these names will likely benefit. Now that many of these stocks are paired with attractive (or reasonably attractive) dividend yields, it makes them worth consideration by a wider group of the investing population. This increased interest has led to the creation of technology focused, dividend seeking ETFs,” S&P Capital wrote in a recent note. [Dividends and Growth in a Sector ETF]

The First Trust NASDAQ Technology Dividend Index Fund (NYSEArca: TDIV) is up 16.8% year-to-date through early June, compared to the heavyweight PowerShares QQQ Trust (NYSEArca: QQQ) which has given back 12.9% through the same time period. The second-largest IT ETF in our universe, Technology Select Sector SPDR Fund (NYSEArca: XLK), lagged both over that span, returning 10.4%. [Dividend ETFs, Yield Producing Equities Back in Focus]

The fact that TDIV focuses heavily on semiconductors has helped performance as well as yield, since this sub-sector tends to payout yield. In fact, the top 10 holdings in TDIV payout healthy dividends. The total yield for TDIV was 2.62%, which is a bit under the index it is tracking, totaling a 3.3% yield.

Also, according to S&P Dow Jones Indices research, the yield for technology stocks within the S&P 500 Index has increased over the past few years. The yield for tech stocks has increased while it has dropped for classic income producing sectors such as utilities and telecom. [Cyclical Sector ETFs Can Perform in a Rising Rate Environment]

First Trust NASDAQ Technology Dividend Index Fund

Tisha Guerrero contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.