On Tuesday, I showed you that tech is one of the very best places to find great dividends.
Here ‘s the thing; These are not your traditional dividend payers from years gone by. They’re an example of a new trend that we’re seeing in action right now.
I still firmly believe that the road to wealth is paid with tech.
Not with staid dividend stocks, but with bona fide growth leaders. See, even ten years ago tech darlings put all their money into growing faster, leaving nothing to pay a dividend with.
Today’s tech world looks very different.
It’s all because of the digital economy. This new dynamic has created earnings giants that make so much cash, they can easily invest in the next round of growth – and still pay a nice dividend to shareholders.
You may recall that in our last chat, I showed you three tech stocks that offered appreciation and yield.
Today, I want to follow up with the flip side of this investing coin.
It’s a way to cash in on all the great tech dividend players in one fell swoop…
The New Search for Dividends
With unemployment now down to 7.9% from its COVID high of 14.7% in April, the economy is clearly recovering.
But the pace at which unemployment is falling has stalled. You can see that in this chart from the Federal Reserve:
The current jobless rate is clearly much too high for the Fed’s liking, and the rate of employment growth is too slow as well.
That’s why the central bank has already said it will keep interest rates at their current rock-bottom levels for at least the next two years.
No wonder investors are scrambling for a good, reliable source of yield.
Low interest rates mean that bank accounts, bonds, certificates of deposit, and most traditional dividend stocks are all paying scraps, at best.
That’s where tech comes in. Now that the big tech leaders have “grown up,” so to speak, many of them have begun rewarding shareholders with handsome dividends.
While still investing billions into creating the next round of growth.
Now, it’s possible to get started investing with some of these classic and still-amazing tech leaders like Apple Inc. (AAPL) and Microsoft Corp. (MSFT) for less than $5 each, but I don’t want to get too off track here. You can learn more about that right here.
One consistent theme I hear from readers these days is they want to hedge against the volatility of late.
But they also want to get a respectable yield. And some upside appreciation would be nice as well.
Getting all that in one fell swoop is not as difficult as it sounds.
Not if you know where to look…
Here’s Where to Look
It’s an ETF called First Trust NASDAQ Technology Dividend Index Fund (TDIV) that invests in up to 100 U.S.-listed tech and telecom companies that pay dividends.
TDIV itself pays an annual dividend, of course. It’s currently sitting at $0.8972 per share with a 52-week yield of 2.03%. Plus, it has an expense of just 0.5%.
To be included in the ETF, a company’s stock must also have a market cap of at least $500 million and have paid a dividend for the last 12 months.
But besides these mega-caps, TDIV also holds a number of stocks you might not think about at first glance. Take a look:
Verizon Communications Inc. (VZ) is America’s second-largest telecom company and second-largest mobile network provider. You may not think of Verizon as a tech company, but as the company behind what’s widely considered to be the most extensive and fastest mobile data network, it’s at the forefront of most of today’s key tech trends, including the Internet of Things, 5G, and edge computing.
International Business Machines Corp. (IBM), or “Big Blue” as it’s affectionally called, is the grand-daddy of tech stocks, with a storied history of several crucial innovations that helped bring about the digital era. The firm has since moved out of the consumer product business, and is now a research and consulting-focused firm that works on nanotechnology, its Watson AI-computer, health tech, cloud computing, and IT services. It pays a 5.41% dividend yield. But over the past five years, the stock is down 6%. So, I believe an ETF like this is the best way to invest.
Broadcom Inc. (AVGO) is another storied name in the history of computing. If you’ve ever connected to the Internet through a cable modem or Wi-Fi router, chances are you’ve used a Broadcom chip without knowing it. Broadcom designs chips that power wireless communications, wired Internet, optical sensors, hard drivers, and so much more. The firm is also a key designer of the devices and software that keep corporate networks and the Internet running smoothly.
And let’s not forget Telecom Argentina S.A. (TEO). It’s the largest telecom in northern Argentina, including Buenos Aires. Besides wired phone service, the company runs a wireless phone network and provides cable TV and Internet access. With South America’s middle-class growing rapidly and using ever more connected devices and services, companies like this one stand to grow very fast. Now, Telecom Argentina’s very high dividend of 14.77% would not be safe to own on your own. But even if a cut in its dividend slams the stock, it won’t crash the TDIV ETF.
Add it all up and you can see why I think this is a great way for retail investors to play the tech dividend trend in a single investment.
Cheers and good investing,
Michael A. Robinson