The Nasdaq-100, one of the world’s most widely-followed stock indexes, celebrated its 30th anniversary on Jan. 31, but that is not the only milestone the index and the relevant exchange traded funds, such as the PowerShares QQQ (NasdaqGM: QQQ), are celebrating.
On Thursday, the combined market value of the Nasdaq-100’s member firms topped $5 trillion for the first time. On Friday, QQQ, the Nasdaq-100 tracking ETF, is trading at its highest levels in nearly 15 years. The Nasdaq-100’s evolution and the corresponding changes to QQQ have served investors well.
Though still technology-heavy (the sector currently accounts for nearly 58% of QQQ’s weight), the Nasdaq-100 is no longer the “all tech” index it was viewed as when it debuted 30 years ago.
“The current index is still solidly technology weighted, led by issuers such as Apple (NasdaqGS: AAPL), Microsoft (NasdaqGS: MSFT), Google (NasdaqGS: GOOG), Intel (NasdaqGS: INTC) and Facebook (NasdaqGS: FB). Still, the Nasdaq-100 is by no means a pure technology index. In fact, the current technology weight is comparatively low by historical standards,” according to a research note from Nasdaq Global Indexes. “Again, the Nasdaq-100 clearly stands out for its high Technology weighting. It is also heavily weighted in Consumer Services and Health Care, the latter being due primarily to the presence of bio-tech companies.”
Consumer discretionary names currently account for 19.3% of QQQ’s weight while health care accounts for 15%. Two discretionary names – Amazon (NasdaqGS: AMZN) and Comcast (NasdaqGS: CMCSA) – are found among QQQ’s top 10 holdings. [Evolving Nasdaq Fosters New Highs]
“In 1985, Intel was the largest component in the Nasdaq-100, with a market cap of $3.5 billion. The second and third largest components in 1985, MCI and Apple, had market caps of $2.3 billion and $1.8 billion, respectively. In total, the market cap of the Nasdaq-100 was $58 billion in 1985, and has since grown to 80 times that size, to its current value of approximately $4.99 trillion and includes three of the top five largest companies in the world by market capitalization,” according to Nasdaq.
Apple and Intel are among the seven current Nasdaq-100 stocks that were original members of the index. Over the past 30 years, nearly 450 companies have been members of the index. Here is a look at QQQ’s top 10 holdings when that ETF debuted in March 1999.
Chart Courtesy: Nasdaq
There is another big change to the Nasdaq-100 that is helping investors: The tech sector’s rising dividend credibility. When QQQ debuted in March 1999, the ETF’s dividend yield was just 0.05%. As of Feb. 19, QQQ’s trailing 12-month yield was 1.35%, according to PowerShares data.
Apple, Microsoft, Google and Cisco Systems (NasdaqGS: CSCO) have a combined $345 billion in cash. Although Google is not yet a dividend payer, Apple, Microsoft and Cisco, a combined 25.2% of QQQ’s weight, have delivered exponential dividend growth in recent years. Even before recently announced increases, Microsoft’s dividend had more than doubled since 2010 while Cisco’s payout had more than tripled since 2011. [Embracing Old Tech ETFs]
“It is worth noting that while the dividend yield of the Nasdaq-100 is lower than that of the other indexes, it has been growing. For example, ten years ago the dividend yield was only 0.18%; one-sixth of today’s level. The last ten years have seen steady growth in the dividend yield to today’s level,” according to Nasdaq.
Today, the Nasdaq-100 and QQQ are actually home to 107 stocks because Nasdaq last year changed its methodology to include multiple share classes. In addition to two share classes from Google, QQQ features two shares classes for Discovery Communications (NasdaqGS: DISCA) and Liberty Media (NasdaqGS: LMCK), among others. [QQQ Methodology Changes]
NASDAQ OMX offers NASDAQ-100 index products in 29 countries with comparable exchange traded products available in 13 countries, including the U.S.
QQQ Top 10 Holdings
Table Courtesy: PowerShares
Tom Lydon’s clients own shares of Apple, Facebook, Microsoft and QQQ.