Income-minded investors who are looking for better dividend growth opportunities can consider targeted exchange traded fund plays to hone in on potentially worthwhile areas, notably those in the healthcare and technology sectors.
The health and tech sectors in the benchmark S&P 500 are expected to experience their best dividend growth this year on a per share basis at 10% for health care and 9% for tech, Barron’s reports.
Furthermore, the healthcare and technology sectors are expected to raise earnings this year by roughly 10%, compared to the mid-single digits gains for traditional dividend-generating segments like utilities and REITs.
According to IHS Markit, U.S. total dividends paid out, excluding special dividends, could total a record $663 billion this year, or 7.2% above 2019’s levels.
IHS Markit noted that the health-care sector “has shown a very aggressive capital deployment stance in [fiscal-year 2019] with mergers and acquisitions being the top priority followed by rising cash dividends.”
Goldman Sachs also previously stated in a note that healthcare stocks “offers longer-term investors a premium yield while positioning for a value rotation.”
ETF investors can also gain exposure to this market segment through sector-specific ETF plays, such as the Health Care Select Sector SPDR ETF (NYSEArca: XLV), Vanguard Health Care ETF (NYSEArca: VHT) and iShares US Healthcare ETF (NYSEArca: IYH).
Meanwhile, on the technology side, IHS Markit argued that “many of the leading tech payers have relatively large cash balances and low debt profiles, reinforcing the sector’s status as top payer.”
For broad technology sector exposure, investors can look to the Technology Select Sector SPDR ETF (NYSEArca: XLK), Vanguard Information Technology ETF (NYSEArca: VGT) and iShares US Technology ETF (NYSEArca: IYW).
Additionally, dividend investors can also target tech names with attractive payouts through something like the First Trust NASDAQ Technology Dividend Index Fund (NasdaqGS: TDIV), which screens for technology names that have paid a regular or common dividend within the past 12 months, have a yield of at least 0.5% and have not had a decrease in common dividends per share paid within past 12 months.
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 as well. TDV follows the S&P Technology Dividend Aristocrats, which requires member firms to have increased dividends for at least seven years.
For more information on the market sectors, visit our sector ETFs category.