Amidst macroeconomic issues, the tech sector remains a standout performer this year, exemplified by the NASDAQ Composite's impressive 29% year-to-date increase.
Therefore, take a look at some of the top tech ETFs, Vanguard Communication Services ETF (VOX), First Trust NASDAQ Technology Dividend Index Fund ETF (TDIV), and ETFMG Prime Cyber Security ETF (HACK), which also pay stable dividends.
Despite continued global economic turbulence, worldwide IT spending is projected to total $4.60 trillion in 2023, an increase of 5.5% from last year. Moreover, the IT services segment is expected to continue its growth trajectory through 2024, largely driven by the infrastructure-as-a-service market, which is projected to reach over 30% growth this year.
Also, Generative AI, exemplified by ChatGPT, is poised to transform the global economy. Upon ChatGPT's launch, the S&P 500 surged along with major tech giants. The technology's potential is enormous, potentially unlocking an additional $1 trillion in AI-related spending over the next decade.
In addition, Morgan Stanley analysts see the market for AI semiconductors tripling from $43 billion to $125 billion over the next three years. The broader AI technology market should grow from $90 billion today to $275 billion by 2027.
Let’s take a look at the ETFs mentioned above:
Vanguard Communication Services ETF (VOX)
VOX is designed to track the performance of the MSCI US Investable Market Index (IMI)/Communication Services 25/50, an index made up of stocks of large, mid-size, and small U.S. companies within the communication services sector, as classified under the GICS.
As of August 21, 2023, the fund’s top holdings include Meta Platforms Inc Class A (META) with a 19.97% weight, Alphabet Inc Class A (GOOGL) with an 11.84% weight,
Alphabet Inc. Class C (GOOG) with a 9.80% weight, and Netflix, Inc. (NFLX) with a 4.81% weight. The fund has a total of 120 holdings, with the top 10 assets comprising 67.4% of AUM.
VOX has $3.27 billion in assets under management. Its expense ratio of 0.10% compares to the category average of 0.37%. Its NAV stands at $106.03 as of August 22. It has a beta of 1.04.
VOX’s annual dividend rate of $0.96 yields 0.91% on the current price level. Its dividend payouts have increased at a 0.57% CAGR over the past three years. The fund has a four-year average yield of 0.91%.
The ETF has gained 28.8% year-to-date to close its last trading session at $105.95. Its fund inflows came in at $61.68 million over the past month and $326.76 million over the past three months.
VOX’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
VOX has an A grade for Peer and Buy & Hold and a B for Trade. In the B-rated Technology Equities ETFs group, it is ranked #2 among 119 ETFs.
Click here to see the POWR Ratings for VOX.
First Trust NASDAQ Technology Dividend Index Fund ETF (TDIV)
TDIV is owned and was developed by Nasdaq, Inc. The index includes up to 100 technology and telecommunications companies that pay a regular or common dividend. TDIV invests at least 90% of its net assets (including investment borrowings) in the common stocks and depositary receipts that comprise the index.
As of August 22, 2023, the fund’s top holdings include International Business Machines Corporation (IBM) with an 8.45% weight, Intel Corporation (INTC) with an 8.42% weight, Broadcom Inc. (AVGO) with an 8.22% weight, and Apple Inc. (AAPL) with a 7.74% weight. The fund has a total of 91 holdings, with the top 10 assets comprising 56.7% of AUM.
TDIV has $2 billion in assets under management. Its expense ratio of 0.50% compares to the category average of 0.55%. Its NAV stands at $57.25 as of August 22. It has a beta of 1.00.
TDIV’s annual dividend rate of $1.13 yields 1.96% on the current price level. Its dividend payouts have increased at a 4.80% CAGR over the past three years. The fund has a four-year average yield of 2.15%.
The ETF has gained 19.8% year-to-date to close its last trading session at $57.25. Its fund inflows came in at $55.03 million over the past three months and $143.1 million over the past six months.
This promising prospect is reflected in TDIV’s POWR Ratings. The ETF has an overall A rating, equating to a Strong Buy on our proprietary rating system.
TDIV has an A grade for Trade, Buy & Hold, and Peer and a B in Trade. It is ranked #4 in the same group.
One can access TDIV’s ratings here.
ETFMG Prime Cyber Security ETF (HACK)
HACK tracks a portfolio of companies providing cyber security solutions that include hardware, software, and services. The fund invests at least 80% of its total assets in the component securities of the index and in ADRs and GDRs based on the component securities in the index.
As of August 21, 2023, the fund’s top holdings include Booz Allen Hamilton Holding Corporation Class A (BAH) with a 5.00% weight, Leidos Holdings, Inc. (LDOS) with a 4.99% weight, Cisco Systems, Inc. (CSCO) with a 4.90% weight, and Akamai Technologies, Inc. (AKAM) with a 4.89% weight. The fund has a total of 55 holdings, with the top 10 assets comprising 46.5% of AUM.
HACK has $1.40 billion in assets under management. Its expense ratio is 0.60%. Its NAV stands at $50.37 as of August 22. It has a beta of 0.93.
HACK’s annual dividend rate of $0.09 yields 0.18% on the current price level. Its dividend payouts have increased at a 90.8% CAGR over the past five years. The fund has a four-year average yield of 0.50%.
The ETF has gained 14.1% year-to-date to close its last trading session at $50.28.
HACK’s POWR Ratings reflect this positive outlook. The fund has an overall rating of A, equating to a Strong Buy in our proprietary rating system.
It also has an A grade for Trade, Buy & Hold, and Peer. HACK is ranked #5 in the same group.
To see the POWR Ratings for HACK, click here.
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VOX shares were trading at $107.66 per share on Wednesday morning, up $1.71 (+1.61%). Year-to-date, VOX has gained 31.66%, versus a 16.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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