Exchange Traded Funds (ETFs)

Seeking Solace in Dividends and Technology

As I mention frequently in my paid trading services, I am still bullish with regard to the technology sector, despite the recent economic downturn that has taken place there, as that is where the innovations that help us live better, richer and fuller lives are developed, created and produced.

In addition, I am also bullish on dividend-paying stocks, especially during a time of market volatility such as now. Not only do dividends serve to augment income derived from other sources, but economic research has also demonstrated a link between dividend payouts and a lower probability of a sharp decline in share price.

Traditionally, technology companies have been well-known for not paying dividends, as their managers often prioritize the decision to reinvest profits back into the business to generate growth. However, certain dividend-paying technology stocks are out there, and some make an appearance in my trading services.

So, why not combine these two criteria into a single, exchange-traded-fund (ETF) centered package?

The TDIV ETF, also known as the First Trust NASDAQ Technology Dividend Index Fund (NASDAQ: TDIV) is an investment vehicle designed to provide exposure to technology companies that pay dividends. These companies are mostly based in the United States, with international exposure coming mostly from American Depositary Receipts (ADRs). The fund’s managers are also interested in both large-cap and mid-cap stocks, decreasing this exchange-traded fund’s level of risk to a specific part of the technology sector.

The companies in TDIV’s portfolio are first weighted according to their dividend yield relative to other securities in the index and then adjusted so that tech companies occupy 80% of the index, while telecom companies occupy only 20%.

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Top holdings in TDIV’s portfolio include Broadcom Inc. (NASDAQ: AVGO), Apple Inc. (NASDAQ: AAPL), Microsoft Corp. (NASDAQ: MSFT), International Business Machines Corporation (NYSE: IBM), Intel Corporation (NASDAQ: INTC), Oracle Corporation (NYSE: ORCL), QUALCOMM Incorporated (NASDAQ: QCOM), Texas Instruments Incorporated (NASDAQ: TXN) and Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (NYSE: TSM).

TDIV has a relatively low expense ratio of 0.50% compared to other technology-focused ETFs. It is down 2.58% over the past month, dipped 1.32% over the past three months and climbed 5.25% year to date.

While TDIV can be a way to gain access into the technology sector, this fund is not without its risks. As with any investment, it’s important to do your own research and consider your personal investment goals and risk tolerance before making a decision to invest.

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.