The PowerShares QQQ (NasdaqGS: QQQ), the sixth-largest U.S. ETF by assets, has changed a lot since its debut in March 1999. Year-to-date, QQQ is higher by 25%. With the technology bubble still fresh in investors’ minds and the Nasdaq Composite inching towards 4,000, bubble chatter is not uncommon these days.
But this is not 1999 or 2000. With the Nasdaq Composite close to traversing 4,000 for the first time in 13 years, it is worth noting that the index is home to more dividend payers, fewer dot-coms and a more reasonable valuation than in 1999, reports Steven Russolillo for the Wall Street Journal.
QQQ has not forsaken its tech roots. The sector still represent s 57% of the fund’s weight and consumer discretionary, the realm of companies such as Amazon (NasdaqGM: AMZN), accounts for nearly 21% of the ETF’s weight.
A 13.3% allocation to health care, on the Nasdaq that usually means biotechnology and medical devices, has helped power QQQ higher this year even as Apple (NasdaqGM: AAPL), QQQ’s largest holding has been a disappointment on a year-to-date basis. [Biotech ETF Sell-Off Could be Temporary Setback]
More than half of the Nasdaq 100’s constituents now pay dividends. The index currently sports a dividend yield of 1.41%, compared to 0.11% in December 1999, according to the Journal. “OId school” tech titans such as Intel (NasdaqGM: INTC) and Microsoft (NasdaqGM: MSFT) have become steady dividend growers and, overall, tech has been one of the leading contributors to S&P 500 dividend growth over the past three years.
The technology sector has been legitimized as a dividend destination to the point that First Trust last year introduced the First Trust NASDAQ Technology Dividend Index Fund (NasdaqGS: TDIV). Since its August 2012 debut, TDIV has accumulated $242.5 million in assets. [Tech ETF With a Dividend Twist]
There is further evidence that QQQ and the Nasdaq are not racing toward bubble territory. At least not yet. As the Journal notes, there are about 100 few dot-coms in QQQ’s underlying index today and the Nasdaq had a P/E north of 150 in late 1999. QQQ’s P/E was just 18.6 at the end of the third quarter, according to PowerShares data.
With $41.5 billion in assets, QQQ is the largest PowerShares ETF. It may just be anecdotal evidence that another tech bubble is not brewing, but QQQ is not the leading PowerShares ETF in terms of inflows over the past year. That honor belongs to the PowerShares Senior Loan Portfolio (NYSE: BKLN), which has hauled in $2.2 billion more than QQQ.
PowerShares QQQ
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of Apple, Amazon, Microsoft and QQQ.