Due in large part to the consumer discretionary, energy, and real estate sectors, 2020 is a rough year on the dividend front. The Federal Reserve didn’t do owners of bank equities and ETFs any favors, either, when it restricted payout increases and buybacks earlier this year.

However, the high-flying technology sector is defying grim dividend action, delivering payout growth for investors this year. The First Trust NASDAQ Technology Dividend Index Fund (NasdaqGS: TDIV) puts investors at the center of that positive trend. TDIV 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 the past 12 months.

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.

TDIV tracks the NASDAQ Technology Dividend Index and allocates nearly 20% of its combined weight to tech behemoths Apple Inc. (AAPL) and Microsoft Corp. (MSFT).

Time for TDIV

While growth-oriented technology names may not be synonymous with yields, income seekers can still find attractive payouts with TDIV. Moreover, many of TDIV’s 88 holdings have strong cash reserves, which support dividend sustainability and growth.

As just two examples of the strength in tech dividends Dow components Apple and International Business Machines (NYSE: IBM) recently boosted payouts. In fact, IBM’s dividend increase streak is now out 25 years. IBM is TDIV’s third-largest component at a weight of 6.85%.

Moreover, with bond yields still hovering near historic lows and economic growth under pressure, many yield-hungry investors will continue to look for alternative sources for income.

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.

“Over the past 10 years, within the Tech sector of the S&P 500®, 26 companies initiated dividend payments and 59 companies increased their dividends at various points throughout those years, for a total of 376 dividend increases in the sector,” said S&P Dow Jones Indices in a recent note.

For more on innovative portfolio ideas, visit our Nasdaq Portfolio Solutions Channel.

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.