In bygone investing eras, the technology sector wasn't exactly the premier destination for dividend investors. While the dividend yield of 1.10% on the S&P 500 Technology Index is by no means high, the sector is becoming a reliable source of payout growth.

What Happened

There are some exchange-traded funds explicitly dedicated to the theme of tech dividend growth with the ProShares S&P Technology Dividend Aristocrats ETF (CBOE: TDV) being the newest member of that fray.

TDV, which debuted last November, follows the S&P Technology Dividend Aristocrats Index, the tech offshoot of the popular S&P 500 Dividend Aristocrats Index. The requirement for entry into TDV's benchmark is a payout increase streak of at least seven years.

Why It's Important

Data confirm that tech is an increasingly credible dividend destination.

“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.

TDV's seven-year increase streak requirement applied to a sector where dividends are a recent phenomenon give the fund a focused lineup of 34 stocks, which are equally weighted. At the end of last year, 28 of the fund's components had payout hike streaks exceeding the seven-year mandate and 16 had increase strings of least a decade.

TDV is home to four Dow components: International Business Machines IBM, Microsoft MSFT, Visa V, and Cisco Systems CSCO. Apple AAPL and Intel INTC, among others, are in position to join TDV sooner than later.

What's Next

History doesn't always repeat, but it often rhymes. To that end, long-term data indicate there are other benefits to owning tech dividend payers beyond the obvious.

“The S&P Technology Dividend Aristocrats Index provided similar risk-adjusted returns to the companies from the S&P TMI that are classified in the Tech sector over three- and five-year horizons, with lower volatility and higher dividend yield,” according to S&P Dow Jones Indices. “The risk/return profile also compared favorably to the widely followed S&P 500 Dividend Aristocrats Index."

With TDV, investors may be able to get that alluring combination of comparable performance and low volatility.

“The performance of the index has shown that it has a similar risk/return profile to the broader sector, with lower volatility and higher dividend yield. Ultimately, the index enables dividend-focused market participants to gain exposure to the Tech sector while maintaining growth and value characteristics,” according to S&P Dow Jones.