As has been widely reported, domestic dividends hit all-time highs last year, rebounding from the dark days of cuts and suspensions caused by the onset of the coronavirus pandemic in 2020. More positive dividend news is expected this year, putting a variety of related exchange traded funds in the spotlight.
That group includes the First Trust NASDAQ Technology Dividend Index Fund (TDIV ). TDIV tracks the NASDAQ Technology Dividend Index. While it focuses on technology stocks, TDIV offers investors inroads to potentially lengthy dividend growth.
Indeed, there was a time when equity income investors scoffed at the notion of tech stocks as dividend plays, but in the case of tech dividends, times are changing for the better.
In 2021, “technology dividends continued their steady rise, up 5.4% on an underlying basis, though lower one-off special payments meant that the headline total was flat year-on-year at $91.2 billion,” according to the latest reading of the Janus Henderson Global Dividend Index.
The research firm notes that in the U.S., the financial services and healthcare sectors combined for nearly a third of dividends paid from 2017 through 2021. Underscoring the case for TDIV, technology chipped in 17% of domestic dividends over that span. On a percentage basis, only financial services at 19% was ahead of tech.
“The median, or typical, dividend increase on a per share basis was 8.0%, however. Technology dividends have been the biggest driver of long-term growth, accounting for a quarter of the increase in US payouts in the last ten years,” notes Janus Henderson.
Proving that dividends are taking off in the tech sector, TDIV is home to 91 stocks, which is a healthy roster size for an ETF dedicated to dividend stocks in a sector previously not known for payouts. Integral to the TDIV story is that perhaps more so than some other sectors, tech is loaded with cash-rich companies that can easily support and grow payouts over the long haul.
Among the top 15 U.S. dividend payers in dollar terms are Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), and Verizon (NYSE:VZ). That trio combines for 17.4% of TDIV’s roster. TDIV’s 12-month distribution rate of 1.92% implies ample room for growth.
“In 2021 technology payouts were more than four times larger than in 2011, increasing their share of the US total from one tenth to one sixth,” adds Janus Henderson.
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