2020 will be remembered as one of the wildest years in recent memory, both from a financial markets standpoint and life in general. 2021, however, could be a different story. If the markets keep betting that a COVID vaccine will be available sometime in 2021 and the economy is on track for a recovery, it could be a big year for dividend ETFs.
Why? In an economic rebound, value and cyclical stocks tend to outperform - two areas of the market that are often overweight in dividend funds. Financials, energy and industrials could perform particularly well and that would provide a big boost to many dividend stocks, particularly high yielders.
But it will likely be a picker's market. Investors probably won't be able to invest in any old dividend ETF and expect market-beating returns.
Here's my list of top tech ETF picks for 2021.
Fidelity MSCI Information Tech ETF (FTEC)
Dividend Yield: 0.85%
FTEC provides broad tech sector coverage and comes cheaper than any other ETF in the space.
This fund would make an ideal choice if you were looking to generally overweight the tech sector in your portfolio. Many investors will likely lean towards the Technology Select Sector SPDR ETF (XLK) for this purpose, but I prefer the lower cost structure of FTEC.
First Trust Nasdaq Technology Dividend ETF (TDIV)
Dividend Yield: 1.96%
TDIV targets yield-paying companies in the tech sector and dividend value weights its qualifying components.
This fund requires a relatively small 0.5% yield in order to qualify, but the dividend dollar weighted methodology tends to overweight higher yielders in the portfolio. With five companies - Intel, Cisco, Apple, Microsoft and IBM - maintaining weightings of at least 7%, the portfolio is a little top heavy.
iShares Global Tech ETF (IXN)
Dividend Yield: 0.74%
IXN focuses on the global tech sector and currently has nearly 25% of assets dedicated to overseas companies.
This fund also offers broad tech sector exposure, but expands beyond the U.S. borders, so it includes names, such as Taiwan Semiconductor and Samsung. Apple and Microsoft comprise a full 1/3 of this portfolio.
Emerging Markets Internet & E-Commerce ETF (EMQQ)
Dividend Yield: 0.75%
EMQQ offers investors exposure to internet & e-commerce growth in technologically underdeveloped areas of the world.
I expect emerging markets to outperform the S&P 500 in 2021 and the e-commerce segment is an ideal area to target in these areas of the world. We'll need to keep an eye on how the re-opening trade may affect this industry, but even with that there's a lot of potential growth in this space.
iShares Exponential Technologies ETF (XT)
Dividend Yield: 0.99%
XT targets companies that are in the process of developing game-changing technologies in areas, such as big data, nanotechnology and robotics.
Bioinformatics, 3D printing and financial services innovation are also a big focus. The expense ratio of 0.47% is a little high, but this is an intriguing choice if you're looking to take a swing for the fences with part of your portfolio.
iShares Cybersecurity & Tech ETF (IHAK)
Dividend Yield: 0.18%
IHAK provides access to companies at the forefront of cybersecurity innovation along the full value chain of cybersecurity and tech industries.
This fund can benefit from the growing need for cybersecurity safety measures as well as huge growth in spending. With personal data safety and identity theft at the forefront of many corporate business plans, there will be a lot of investment spending in this area.
Wedbush ETFMG Video Game Tech ETF (GAMR)
Dividend Yield: 0.54%
GAMR focuses on the tech development side of the gaming industry, an area which has experienced huge growth during the COVID pandemic.
Because it's tech focused, you won't find names like DraftKings. Instead, it focuses on the companies that make the guts of the systems and sites that operate the platforms and provide the graphics, interfaces, etc.
Defiance 5G Next Gen Connectivity ETF (FIVG)
Dividend Yield: 0.90%
The development and implementation of 5G technology could be a huge theme in 2021 and FIVG targets the big players in that space.
The fund targets global companies that are involved in the development of, or are otherwise instrumental in the rollout of 5G networks. This could be companies involved in networking equipment, satellite-based communications, mobile broadband chips or cloud computing equipment. Top holdings include Qualcomm, Verizon, Xilinx and NXP Semiconductor, so this won't be a pure 5G play.
ARK Fintech Innovation ETF (ARKF)
Dividend Yield: 0.00%
ARK has been a huge ETF industry success story. ARKF invests in companies developing transaction innovation, blockchain and platform development.
Blockchain was more of a buzzword a year or two ago, but the implications of greater acceptance is still large. Cryptocurrencies and cash-less transaction technology are all still growing and make interesting longer-term plays.
KraneShares CSI China Internet ETF (KWEB)
Dividend Yield: 0.05%
KWEB offers access to Chinese internet companies that provide similar services as Google, Facebook, Twitter, eBay and Amazon.
With China coming out of the COVID pandemic faster than other countries, current growth rates are higher and bode well for the continued growth of Chinese e-commerce. The bill that would potentially kick Chinese stocks off of the U.S. exchanges is a low risk in the short-term, but something still worth watching.