In a year when finding dependable dividends is becoming more difficult than income investors expected, the technology sector is standing out, highlighting the advantages of the ProShares S&P Technology Dividend Aristocrats ETF (CBOE: TDV).
TDV, which debuted last November, follows the S&P Technology Dividend Aristocrats, which requires member firms to have payout increase streaks of at least seven years. Its 34 holdings are equally weighted, a strategy that helps reduce single-stock risk, but the fund is nonetheless exposed to some tech dividend payers with attractive traits.
Data confirm the technology sector is an increasingly prominent part of the dividend growth landscape.
“It was once thought that companies from the Information Technology sector do not pay dividends,” notes S&P Dow Jones Indices. “While this may have been the trend a long time ago, it certainly has not been for the last decade. Over the past 10 years, within the Information Technology 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.”
Talking TDV
TDV components are equally weighted, a methodology that reduces single-stock risk and can buffer investors against potential negative payout news among the fund’s components.
“As the Tech industry matures, more companies are consistently paying out dividends,” said S&P Dow Jones. “Adjusting the dividend policy to accommodate newer Tech names enables the index to gain more income from these companies.”
Indeed, there is some maturity on TDV’s roster as nearly 30 of its components top the minimum seven-year dividend increase streak requirement. Three have pay increase streaks spanning more than two decades. Semiconductor stocks account for more than 19% of TDIV’s roster while data processors and information technology providers combine for a third.
“The S&P Technology Dividend Aristocrats Index uses an equal weighting methodology. This prevents concentration risk caused by larger market cap names,” according to S&P Dow Jones. “However, because of its alternative weighting method, the S&P Technology Dividend Aristocrats Index has more size diversity than does its benchmark index.”
The index has a dividend yield of 2.37%. TDV, which celebrates its first birthday in November, is up more than 24% since the start of the second quarter.
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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.
