Tech Is An Income Destination. Here's How To Play That Theme

Tech Is An Income Destination. Here's How To Play That Theme

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 IBMMicrosoft MSFTVisa V, and Cisco Systems CSCOApple 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.

1 2
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.