A Fund for Tech Stocks That Pay Juicy Dividends
A fund loaded with big tech firms yields almost as much as the market’s 2%.
On a relative basis, it has been a subpar year for big tech. Over the past year, the group rose 23%, but that lagged Standard & Poor’s 500-stock index by 7 percentage points. That’s one reason tech stocks, which historically have been more expensive than the broad stock market, are looking like bargains these days. The typical large tech-company stock trades at 14 times estimated 2014 profits, while the S&P 500 sells for 15 times earnings.
Technology Select Sector SPDR (symbol XLK) offers broad exposure to technology, but it’s not exactly a pure play on the sector. The exchange-traded fund tracks an index of 72 established firms in the S&P 500, including six telecom companies. The phone companies help boost the ETF’s dividend yield to 1.7%, close to the 2.0% yield of the S&P 500.
Because the ETF is heavy on large companies, the fund hasn’t been as hot as Internet-focused ETFs, which invest in faster-growing firms. Some of those ETFs have gained upward of 40% over the past 12 months, boosted by big gains from the likes of Netflix (up 348%) and Pandora (up 226%). But Technology SPDR hasn’t experienced the same ups and downs, either—over the past five years, it has been about 25% less volatile than the PowerShares Nasdaq Internet ETF.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
In keeping with the benchmark it tracks, the ETF is rebalanced quarterly. The index holdings are weighted by market value, but that rule goes by the wayside if a stock exceeds 25% of the fund’s assets.
