Tapping into Dividend-Paying Technology Stocks

servers in the cloud

Technology was the one of the few shining stars during the darkest days of the COVID-19 pandemic.

Indeed, as a sizable percentage of the American population shifted into work-from-home mode, technology companies saw their earnings per share (EPS) sharply rise. Concurrently, the tech-heavy Nasdaq repeatedly hit new highs.

Since the start of 2020, the Nasdaq Composite has risen more than 50%. As the old saying goes, however, “what goes up must come down.”

Technology stocks then had a very weak first quarter in 2021, as investors started to move funds into value stocks and other companies that were leveraged toward the reopening of the economy. The result was an inevitable correction in the technology sector.

This does not mean, however, that the sector should now be totally set aside. Technology is still in a growth pattern, as some of the trends that were occurring before the pandemic are now accelerating and some of the changes that were impelled as a result of the pandemic are now becoming permanent, or at least protracted.

Due to the recent pullback in the technology sector and the onset of earnings season, it is time to turn our attention to the First Trust NASDAQ Technology Dividend Index Fund (NASDAQ: TDIV).

In order to sift through the bounty of technology companies that are out there, this exchange-traded fund (ETF) tracks a dividend-weighted index of U.S.-listed stocks that provide regular payouts. All companies in the fund are weighted according to their dividend yield relative to other stocks in the portfolio, and then adjusted so that technology companies make up 80% of the fund. Telecom companies make up the other 20%.

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Some of this fund’s top holdings include Cisco Systems, Inc. (NASDAQ: CSCO), International Business Machines Corporation (NYSE: IBM), Microsoft Corporation (NASDAQ: MSFT), Apple Inc. (NASDAQ: AAPL), Broadcom Inc. (NASDAQ: AVGO), Oracle Corporation (NYSE: ORCL), Texas Instruments Incorporated (NASDAQ: TXN) and Intel Corporation (NASDAQ: INTC).

This fund’s performance has been relatively strong, even when including the damage done by the COVID-19 pandemic. As of April 6, TDIV has been up 8.21% over the past month and up 12.30% for the past three months. It is currently up 12.39% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $1.51 billion in assets under management and has an expense ratio of 0.50%.

In short, while TDIV does provide an investor with a chance to tap into the world of technology, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.