Dividend investing has traditionally been dominated by the utility, financial, and consumer goods spaces. But a new theme is emerging that is combining promising growth potential with cash-rich balance sheets, explains David Fabian of FMD Capital Management.

Large- and mid-cap technology companies have been increasingly turning their profits towards stock buybacks and income streams with the intent of enticing fresh capital to their stock.

Companies such as Apple (AAPL) and Microsoft (MSFT) have undergone a transformation from growth-oriented powerhouses to value-added income names.
While picking a few well-known dividend paying stocks within the technology sector is one way to play this theme, several ETFs offer exposure to this opportunity as well.

The First Trust NASDAQ Technology Dividend Index Fund (TDIV) is a specialized ETF that focuses exclusively on technology and telecom companies that have paid a dividend in the last 12 months.

Both AAPL and MSFT are in the top five holdings of TDIV, which calculates the weightings of the underlying stocks based on a modified dividend weighting methodology. This allows for a fundamental distribution of capital based on yield and sector makeup rather than market cap.

TDIV currently has over $700 million in total assets spread amongst a diverse group of nearly 100 dividend paying technology companies.

The 30-day SEC yield of this ETF is currently listed at 2.66% and income is paid quarterly to shareholders. In addition, the expense ratio of TDIV is listed at a modest 0.50% annually.

This ETF can potentially be used within the context of a diversified income portfolio as a tactical allocation that over weights the large-cap technology sector. Many of the underlying companies in TDIV are stable, global growth stories that have continued to offer strong momentum as well.

Those seeking to increase the yield of their portfolio while still maintaining an eye towards capital appreciation may find that this ETF meets their criteria for equity income.

Furthermore, the changing landscape of interest rates may further increase the value of these technology enterprises as they are less sensitive to fluctuations in bond yields than alternative sectors such as utilities.

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