With the Nasdaq faltering again Tuesday, it might be hard for some investors to believe that things are not entirely gloom and doom in the technology sector.
Most of the gloom has come courtesy of once high-flying Internet and social media stocks. The PowerShares QQQ (NasdaqGM: QQQ) is off 5.5% over the past month, but the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) has been more than twice as bad. The Global X Social Media Index ETF (NasdaqGM: SOCL) has been more than three times worse than QQQ. [Social Media ETF Close to Bear Market]
Not all technology sector ETFs are wearing scarlet letters though. While not much too write home about, more conservatively-positioned tech ETFs, such as Technology Select Sector SPDR (NYSEArca: XLK) and the Vanguard Information Technology ETF (NYSEArca: VGT), have been sturdy in recent weeks, easily outpacing the Nasdaq Composite.
Another standout has been the First Trust NASDAQ Technology Dividend Index Fund (NasdaqGM: TDIV), which was sporting one-month gain of nearly 3% entering Tuesday’s session (TDIV is down 0.8% at this writing). A large part of the reason XLK, VGT and in particular TDIV have been sturdy as higher beta tech fare has withered is the ETFs’ allocations to the sector’s more mature names. [Old School Tech Names Rise Again]
Think Dow components Microsoft (NasdaqGS: MSFT), International Business Machines (NYSE: IBM), Intel (NasdaqGS: INTC) and Cisco (NasdaqGS: CSCO). Those are four of the 14 Dow stocks that are higher year-to-date. Those are TDIV’s four largest holdings, combining for a third of the ETF’s weight.
Allocations like those explain “why TDIV has the lowest volatility of the 36 tech ETFs and is about half as volatile as the super-jumpy SOCL,” writes Eric Balchunas for Bloomberg.
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 and TDIV is up 24.6% since coming to market in August 2014. [Tech ETFs Become Dividend Divas]
Investors have noticed and have poured almost $464 million into the fund.
“TDIV has had a DiMaggio-esque streak of positive inflows for 20 straight months since its August 2012 inception. It even has positive inflows so far in April — a minor miracle given the recent carnage in tech. The flows have been slow and steady, which indicates that smaller (read: more stable) investors are doing the buying. That, plus all the attention social media got, is why TDIV has slipped under the radar and become a sleeper hit,” writes Balchunas.
First Trust NASDAQ Technology Dividend Index Fund
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of Cisco, Microsoft and QQQ.