First Trust, the company behind the popular suite of AlphaDEX ETFs, has become the first ETF at the crossroads to two red hot investment trends: technology stocks and dividends. The new First Trust NASDAQ Technology Dividend Index Fund (TDIV) will seek to replicate the NASDAQ Technology Dividend Index, a benchmark that includes tech and telecom stocks listed on the NASDAQ that have paid a regular dividend during the past 12 months. Technology stocks will account for about 80% of the index, with telecom companies making up the remaining 20% [see also High Tech ETFdb Portfolio].
Additionally, component stocks must have a yield of at least 0.5%, have not had a decrease in common dividends per share paid within past 12 months, and may not be issued by an issuer currently in bankruptcy proceedings.
Under The Hood
The TDIV portfolio will include a number of the usual suspects in the tech industry, such as QUALCOMM, Microsoft, IBM, Intel, and Cisco Systems. In total, there will be about 60 individual holdings in the portfolio [try our Free ETF Stock Exposure Tool].
Not yet included in the portfolio is Apple (AAPL), which recently announced that it would begin a regular distribution to its common shareholders. The index will next be evaluated in September, at which time AAPL could be eligible for inclusion.
According to Dividend.com, the top five components of TDIV have yields that range from about 1.7% to 3.4%.
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Technology stocks have been the leaders of the pack so far in 2012; the Technology SPDR (XLK) has added about 19% on the year, compared to just 13% for the broad-based S&P SPDR (SPY). At the same time, investor interest in dividend paying stocks is clearly growing–perhaps partially as a result of the prolonged low interest rate environment. There are now more than 50 dividend ETFs available to U.S. investors, with aggregate assets of more than $50 billion [see also Monthly Dividend ETFdb Portfolio].
TDIV will offer a way for investors looking to bet on the tech sector to focus exclusively on the dividend-paying section of that demographic. The new ETF will charge an expense ratio of 0.50%, which is very close to the average for the Technology Equities ETFdb Category.
Disclosure: No positions at time of writing.