Dividend ETFs Gleam but Tech Dividends May Shine Brighter
NEW YORK (ETF Expert) -- All of those Apple (AAPL) alarmists are eating crow for breakfast. They chastised CEO Tim Cook for months. They declared the death of the tech manufacturing giant at every opportunity. Thursday, the Cupertino, Calif.-based multinational is asking those same naysayers, "How do you like me now?"
Sentiment changes quickly on Wall Street. The "brightest minds" now concur that there's a whole lot to love about the revenue beat, the profit beat, the 7-for-1 stock split, the dividend hike of roughly 8% as well as a 50% annual increase in Apple's stock buyback plan.
Granted, there are those who have reacted with extraordinary skepticism. They view the company's shock-and-awe presentation as a pathetic scheme from a team that has run out of innovative ideas. From my perspective, though, the majority of folks respect when big firms emphasize ways to reward shareholders. Stock buybacks? Dividend hikes? Stock splits? Historically they all tend to work in favor of the owners, not the sellers.
Let me caution those who think that I am enamored with Apple or even Apple products. The truth is, I may trade in my iPhone for one of Samsung's (SSNLF) if the upcoming iPhone 6 fails to impress. Those remarkably packed retail stores? I can't prove it, but the traffic at Apple retail outlets appears to be thinning out.None of my concerns make me bearish on the California corporation's shares, however. If anything, the i-Everything producer has increased my confidence in one of my top client holdings, First Trust Technology Dividend (TDIV). Not only is Apple a constituent, but TDIV's 30-day SEC yield of 2.7% is 85 basis points better than that of the broader SPDR S&P 500 Trust (SPY). The majority of my clients are petrified by technology companies because of their experiences with the dot-com blowup of 2000. Moreover, the news regarding momentum-based "new tech" -- Facebook (FB), Netflix (NFLX), Weibo (WB), initial public offerings, 2.0 -- has not alleviated those fears.
Fortunately, "old tech" that rewards its shareholders via buybacks and dividend increases are easy to support. For one thing, the ownership of Cisco (CSCO), Oracle (ORCL), Apple, Microsoft (MSFT) and Qualcomm (QCOM) in a single basket enhances diversification. Separately, in an era of ultra-low interest rates, an ETF like TDIV is serving up an admirable income stream. There may be another layer of protection for First Trust's dividend darling. Specifically, it trades at a handsome discount to broader equity benchmarks. Birinyi Associates pegs the trailing 12 month price-to-earnings ratio for the S&P 500 at 17.9. In contrast, TDIV is trading at a more fundamentally attractive 14.5. Some have pointed out that several of the top constituents in TDIV are trading at P/E multiples that are below long-term historical averages.
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