Until recently, the tech sector has not been a prime dividend destination. That has changed as the sector has been one of the largest contributors to S&P 500 since the financial crisis, but even tech dividend growth stalwarts such as Apple (NasdaqGS: AAPL), Cisco (NasdaqGS: CSCO ) and Microsoft (NasdaqGS: MSFT) do not have payout increase streaks long enough to qualify for entry into ETFs that mandate 10 years or more of boosted dividends.
Those three stocks along IBM (NYSE: IBM) and Qualcoom (NasdaqGS: QCOM) combine for about 13% of DGRW’s weight.
The average payout increase from Apple, IBM, Cisco and Qualcomm this year is almost 14%. that does not include an increase from Microsoft, DGRW’s third-largest holding, which usually delivers in the second half of the year. Microsoft’s last two dividend increases were 21.7% and 15%, respectively.
The average payout ratio among DGRW’s top-five holdings is 47%, a number skewed higher by Procter & Gamble’s (NYSE: PG) 61.5% ratio. However, the cash on hand figures and low payout ratios of DGRW’s largest tech holdings combined with the fact that the ETF features no telecom or utilities exposure indicate the ETF’s dividends should be safe and continue growing even if interest rates rise. [Inflation-Fighting Dividend ETFs]
WisdomTree U.S. Dividend Growth Fund Sector Weights
Table Courtesy: WisdomTree
Todd Shriber owns shares of DGRW. Tom Lydon’s clients own shares of Apple, Cisco and Microsoft.