Historically, the technology sector has not been viewed as fertile territory for dividend investors, but in recent years, that view has been altered for the better as technology has been one of the primary drivers of S&P 500 dividend growth in recent years. Investors can use the First Trust NASDAQ Technology Dividend Index Fund (NasdaqGS: TDIV) to play that theme.

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 exchange traded funds. In fact, in dollar terms, technology is now the largest dividend-paying sector in the U.S.

“Tech behemoths such as Apple Inc. (AAPL) and Microsoft Corp. (MSFT) are currently excluded from some well-known dividend ETFs for the simple reason that these companies have not boosted pays for enough consecutive years, but the trajectory of tech dividends is undoubtedly positive. Along with being voracious buyers of their own shares, tech companies have shown a willingness to spend cash on dividend increase,” according to Nasdaq.

Apple and Microsoft combine for nearly 17% of TDIV’s weight.

What’s Next for Tech Sector?

When it comes to defensive sectors, the groups that usually garner that label are consumer staples, healthcare, real estate and utilities. The technology sector and ETFs, such as TDIV, are widely viewed as cyclical, not defensive ideas.

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.

“Tech giants spent a combined $50 billion on dividends last year. Dividend growth was one percentage point higher than the previous year, but smaller than the acceleration in 2016,” according to Bloomberg.

TDIV’s returns can lag those of other tech-heavy benchmarks, but the fund is often less volatile than traditional tech funds.

“Differences in terms of holdings mean differences in terms of total returns as highlighted by TDIV trailing the Nasdaq-100 by nearly 1,200 basis points over the past three years. To its credit, TDIV was 280 basis points less volatile than the Nasdaq-100 during that period,” according to Nasdaq.

For investors looking for continued upside in U.S. cyclical sectors over defensive sectors, the Direxion MSCI Cyclicals Over Defensives ETF (NYSEArca: RWCD) offers them the ability to benefit not only from cyclical sectors potentially performing well, but from their outperformance compared to defensive sectors.

Conversely, if investors believe that U.S. defensive sectors will outperform cyclical sectors, the Direxion MSCI Defensives Over Cyclicals ETF (NYSEArca: RWDC) provides a means to not only see defensive sectors perform well, but a way to capitalize on their outperformance compared to cyclical sectors.

For more information on the tech sector, visit our technology category.

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