ETF Trends
ETF Trends

Gone are the days when the technology sector was eschewed by income investors. The largest sector weight in the S&P 500 has also been one of the most prolific contributors to the benchmark U.S. index’s dividend growth over the past several years.

Consider these factoids: The PowerShares QQQ (NasaqGM: QQQ), the NASDAQ-100 tracking ETF, has a trailing 12-month yield of 1.35%, about 50 basis points about its yield at the height of the tech bubble. Powered tech dividend growth, the First Trust NASDAQ Technology Dividend Index Fund (NasdaqGM: TDIV) has become a $644 million ETF in just two years on the market and has recently been hitting a series of new all-time highs. [Rise of Tech Dividends Lifts ETFs]

There are other ETFs that are not dedicated tech plays that can still help investors capture the sector’s rising dividend prominence, including the First Trust NASDAQ Rising Dividend Achievers ETF (NasdaqGM: RDVY). With its January debut, RDVY is one of the newer funds in the dividend growth ETF arena.

RDVY follows the NASDAQ Rising Dividend Achievers Index. As is the case with many of indices and dividend ETFs that are linked to those indices, RDVY has a focus on companies that have track records of boosting their payouts. To be included in the NASDAQ Rising Dividend Achievers Index, companies must have “paid a dividend in the trailing twelve-month period greater than the dividend paid in the trailing twelve-month period three and five years prior,” according to First Trust. [Not Your Grandad’s Dividend ETF]

RDVY’s tech credentials are legitimate. Tech is the ETF’s second-largest sector weight at 23.7% and five of the ETF’s top-10 holdings are tech stocks. That group includes Apple (NasdaqGS: AAPL) and Microsoft (NasdaqGS: MSFT), two of the largest drivers of tech dividend growth in recent years. [Apple’s Rise Lifts These ETFs]

RDVY’s largest sector allocation is 29% to financial services, but because of the requirement that companies must have “paid a dividend in the trailing twelve-month period greater than the dividend paid in the trailing twelve-month period three and five years prior,” investors should not expect to find a batch of money center banks in RDVY.

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