Dividend stocks have been a good way to generate more attractive payouts in an ongoing low-yield environment, and income-minded investors should also consider the often overlooked technology stocks and related exchange traded funds for yields as well.
Tech stocks can be a good source of dividends backed by some of the sturdiest American companies, reports, John Waggoner for InvestmentNews.
Traditionally, tech companies have not considered paying back their investors. Instead, many firms opted to reinvest cash back into the company or buy back stocks.
However, times are changing, and the technology sector of the S&P 500 is now among the top dividend issuers. Technology companies began to compensate shareholders during the financial crisis, and the habit stuck.
The Technology Select Sector SPDR (NYSEArca: XLK), which tracks S&P 500 technology companies, comes with a 1.85% 12-month yield.
Looking ahead, most tech companies have enough cash hoards to keep up their dividends for years. For instance, Microsoft (NasdaqGS: MSFT) is holding on to $102.6 billion, Cisco (NasdaqGS: CSCO) has $59.1 billion on hand and Oracle (NYSE: ORCL) has $52.3 billion.
ETF investors can also utilize the First Trust NASDAQ Technology Dividend Index Fund (NasdaqGS: TDIV) to focus on some of the top dividend payers in the tech space. TDIV has a 2.65% 12-month yield.
TDIV includes some criteria for inclusion to make sure tech companies meet the dividend cut. For instance, the ETF only includes companies with at least a 0.5% yield and those that have not cut dividends per share paid within the past year.
Top components in the tech dividend ETF include well-known names like Cisco 8.3%, International Business Machines (NYSE: IBM) 8.2%, Microsoft 8.2%, Intel (NasdaqGS: INTC) 7.1% and Apple (NasdaqGS: AAPL) 7.0%.
The tech ETF is also diversified across its sub-sectors and includes some telecom exposure. TDIV has 20.3% in semiconductors, 16.5% telecom services, 15.8% software, 15.2% tech hardware, 14.5% communications equipment, 9.5% IT services, 4.8% wireless telecom services, 1.5% electronics and 1.0% household durables.
Potential investors, though, should be aware that these dividend tech stocks may underperform during a bull rally when tech growth stocks outperform.
Max Chen contributed to this article.