The technology sector has evolved, and many companies are now operating with mature business models and demonstrating a greater commitment to shareholders through dividends.
Technology stocks are now a leading source of the market’s dividends, and are growing them faster than any other sector.
Well-established technology-related companies that grow their dividends—those in the S&P® Technology Dividend Aristocrats® Index—have quality characteristics that make them especially attractive for investors.
The Tech Sector Has Grown Up—And Is Now an Important Source of Dividends
Technology stocks have long been viewed as an exciting sector to invest in for growth and, more specifically, innovation and invention. And while there will always be a part of the sector that is in earlier-stage or high-growth mode, the sector as a whole has grown up from the long-ago days of the dot-com bubble. Today, a larger portion of the technology sector is made up of well-established companies that have mature business models, attractive growth rates and margins, strong balance sheets, and relatively low levels of debt. S&P reports that almost half of all tech stocks within the S&P Composite 1500 are now generating plenty of cash and rewarding shareholders with dividends—up from 25% in 2011.
Today, technology stocks have become a critical source of the market’s dividends. According to FactSet, technology stocks make up approximately 16% of the S&P Composite 1500 Index’s total dollar value of dividends. Trailing only the financials sector, technology is the index’s second-highest dividend source—and has a strong possibility of becoming number one soon.
The S&P Composite 1500® Total Return Index combines three leading indexes, the S&P 500®, the S&P MidCap 400® and the S&P SmallCap 600®, to cover approximately 90% of U.S. market capitalization.
Dividend income investors who have not focused on or have underweighted technology could be missing a potential opportunity.
Times Have Changed: Technology Is an Important Source of Dividends
Tech Sector Growing Dividends at Faster Rate Than the Market
Technology and technology-related companies have not only started paying dividends, but an elite number have grown their dividends year after year. These dividend growers include some of the largest and most successful technology companies in the world today—Apple, Microsoft, IBM and others—as well as major global consulting firms, credit card companies and other tech-related names.
What’s more, the growth rate of dividends from tech stocks has exceeded the overall market for several years now. In fact, tech companies in the S&P 1500 have more than quadrupled the dollar amount of their dividends through 2020 as compared with what they paid in 2011. (Source: S&P Dow Jones Indices.) This growth rate is the highest of any sector, and it has far exceeded the 9.7% dividend increase for the S&P Composite 1500 as a whole over the same period. And with this index’s tech sector dividend payout ratios currently at only 35%, we believe there is ample room for continued growth.
Technology Companies in the S&P Composite 1500 Index Lead Dividend Growth Rates
S&P Technology Dividend Aristocrats Index: A Quality Approach to Technology Investing
The companies in the S&P® Technology Dividend Aristocrats® Index have grown their dividends for a minimum of seven years and have had hallmarks of quality such as stable earnings, solid fundamentals, and often strong histories of profit and growth.
Why does this matter? Collectively, these dividend growers have produced higher return on equity with lower levels of debt compared with the S&P 500, the index many people think of when they reference “the market.”
S&P Technology Aristocrats Index Has Higher Quality, as Measured by Return on Equity, Than the S&P 500
These characteristics can make technology-related dividend growers especially attractive for investors allocating to technology in their portfolios.
The Only ETF Focused on the S&P Technology Dividend Aristocrats
ProShares S&P Technology Dividend Aristocrats ETF (TDV) is the only ETF focusing on the S&P Technology Dividend Aristocrats Index—well-established technology-related companies that have consistently raised their dividends for at least seven consecutive years.
TDV’s total operating expenses are 0.46%.
The performance quoted represents past performance and does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance may be lower or higher than the performance quoted. Standardized returns and performance data current to the most recent month end may be obtained by visiting ProShares.com.
Shares are bought and sold at market price (not NAV) and are not individually redeemed from the fund. Market price returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. ET (when NAV is normally determined for most funds) and do not represent the returns you would receive if you traded shares at other times. Brokerage commissions will reduce returns.
Index performance is for illustrative purposes only and does not represent fund performance. Index returns do not reflect any management fees, transaction costs or expenses. Indexes are unmanaged and one cannot invest in an index. Past performance is not a guarantee of future results.
See the TDV product page for performance, pricing, index information and more.
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Sources: FactSet, S&P Dow Jones Indices, ProShares.
As of June 30, 2021, TDV’s holdings included Apple (2.83%), Microsoft (2.87%) and IBM (2.81%). Holdings are subject to change. Weightings may fluctuate between reconstitution dates and may be higher or lower than the indicated amounts until they are reset at the next index reconstitution date.
This information is not meant to be investment advice. There is no guarantee dividends will be paid. Companies may reduce or eliminate dividends at any time, and those that do will be dropped from the indexes at reconstitution.
Investing is currently subject to additional risks and uncertainties related to COVID-19, including general economic, market and business conditions; changes in laws or regulations or other actions made by governmental authorities or regulatory bodies; and world economic and political developments.
Investing involves risk, including the possible loss of principal. This ProShares ETFs is non-diversified and entails certain risks, including imperfect benchmark correlation and market price variance, that may decrease performance. Technology companies may be subject to intense competition, product obsolescence, general economic conditions and government regulation and may have limited product lines, markets, financial resources or personnel. Investments in smaller companies typically exhibit higher volatility. Small- and mid-cap companies may have limited product lines or resources, may be dependent upon a particular market niche and may have greater fluctuations in price than the stocks of larger companies. Small- and mid-cap companies may lack the financial and personnel resources to handle economic or industrywide setbacks and, as a result, such setbacks could have a greater effect on small- and mid-cap security prices. Please see summary and full prospectuses for a more complete description of risks. There is no guarantee any ProShares ETF will achieve its investment objective.
Carefully consider the investment objectives, risks, charges and expenses of ProShares before investing. This and other information can be found in their summary and full prospectuses. Read them carefully before investing.
The “S&P Technology Dividend Aristocrats Index” is a product of S&P Dow Jones Indices LLC and its affiliates and has been licensed for use by ProShares. “S&P®” is a registered trademark of Standard & Poor’s Financial Services LLC (“S&P”) and “Dow Jones®” is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and have been licensed for use by S&P Dow Jones Indices LLC and its affiliates. ProShares have not been passed on by S&P Dow Jones Indices LLC and its affiliates as to their legality or suitability. ProShares based on the S&P Technology Dividend Aristocrats Index are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, Dow Jones, S&P or their respective affiliates, and they make no representation regarding the advisability of investing in ProShares. THESE ENTITIES AND THEIR AFFILIATES MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO PROSHARES.