This dividend ETF review series aims at evaluating products regarding the relative past performance of their strategies and quality metrics of their current portfolios.
TDIV strategy and performance
The First Trust NASDAQ Technology Dividend Index Fund (NASDAQ:TDIV) has been tracking the NASDAQ Technology Dividend Index since 8/14/2012. Its distribution yield is about 2% and the total expense ratio is 0.5%.
As described on NASDAQ website, the index “includes up to 100 Technology and Telecommunications companies that pay a regular or common dividend”.
To be eligible, stocks must have at least $500 million in market capitalization, $1 million in 3-month average daily traded value, 0.5% in dividend yield, be listed on a US stock exchange and be classified in Technology or Telecommunications by the Industry Classification Benchmark. Companies are excluded if they have decreased the dividend per share in the past 12 months, entered into a definitive M/A agreement or filed for bankruptcy or similar protection. A maximum of 100 companies passing these rules are included in the Index: those with the highest dividend per share over the last 12 months. The index is reconstituted twice a year and rebalanced quarterly based on a modified dividend value-weighted methodology with weight limits and sector constraints (80% in technology, 20% in telecom).
Since inception (8/14/2012), TDIV has lagged by far the sector benchmark Technology Select Sector SPDR Fund (XLK), and even slightly underperformed the S&P 500 (SPY) in total return and risk-adjusted performance (Sharpe ratio).
Annual.Return | Drawdown | Sharpe ratio | Volatility | |
TDIV | 14.04% | -31.50% | 0.9 | 15.47% |
XLK | 20.66% | -30.72% | 1.2 | 16.27% |
SPY | 14.70% | -32.05% | 1.04 | 13.55% |
Comparing TDIV with a reference strategy
In previous articles, I have shown how three factors may help cut the risk in a dividend portfolio: Return on Assets, Piotroski F-score, Altman Z-score.
The next table
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