Having debuted in early November, the ProShares S&P Technology Dividend Aristocrats ETF (CBOE: TDV) is one of the newest dividend ETFs on the market, but its exposure to mature technology companies could be a benefit to investors in 2020.
TDV is the second fund of its kind, but the first with an explicit dividend increase streak mandate. That new ProShares fund follows the S&P Technology Dividend Aristocrats, which requires member firms to have payout increase streaks of at least seven years.
TDV may be heavily allocated to some old school companies, but tech dividends are a mostly new school concept.
Technology companies historically did not pay out dividends since it would hint that the firm didn’t have anything new to reinvest in to further support their breakneck growth. While this growth-oriented model has worked over the years, the market environment has shifted.
While growth-oriented technology names may not be synonymous with yields, income seekers can still find attractive payouts through a targeted tech sector-related dividend ETF. Over the past decade, the technology sector has increased dividend payments by about 17% to $88 billion, CNBC reports.
What About Cisco?
Home to 34 stocks, TDV’s roster includes the likes of Cisco Systems (NASDAQ: CSCO).
“Cisco has increased its dividends in the last eight consecutive years. In the last three years, dividend payments have increased at an annual rate of 12.2%,” reports Market Realist. “It has a debt balance of $19.6 billion and operating cash flows of $15.6 billion. The company has a dividend payout ratio of around 50%. So, Cisco has enough reserves to pay back debt, increase dividends and buybacks in 2020.”
For years, technology was the not first sector investors thought of when they thought of dividends. The largest sector weight in the S&P 500 is changing that and that change has been a boon for an array of ETFs. In fact, in dollar terms, technology is now the largest dividend-paying sector in the U.S.
However, some analysts see defensive traits in the technology sector, the largest sector weight in the S&P 500. The tech sector’s massive cash pile bolsters its defensive properties.
Cisco has a dividend increase streak of seven years while other big-name TDV holdings, such as Microsoft (NASDAQ: MSFT) and Qualcomm (NASDAQ: QCOM), go beyond that. Microsoft and Qualcomm have dividend increase streaks of 13 years and 15 years, respectively.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.