NASDAQ Index Blog - Posts with tag of "Technology"

Nasdaq Research Update: Technology Sector Continues to Dominate Dividends By: Dave Gedeon
on 2/13/2015

As Q4 earnings wrap up, it is clear that the technology sector continues to power greater returns to shareholders with strong dividends and buybacks fueled by large cash balances, strong earnings, and topline revenue growth.

The Nasdaq Technology Dividend Index is the leading benchmark of dividend-paying technology companies. The index currently tracks 95 securities listed in the U.S. that are involved in technology or telecom.

On a weighted basis, the Nasdaq Technology Dividend Index’s current components have been dramatically increasing the total dollars paid out to shareholders via dividends from a level of $1.5 billion in 2011 to $2.1 billion in 2014 representing a 41% increase. While Apple, the world’s largest company by market capitalization, has become a noted dividend payer it is worth highlighting that excluding Apple from the Technology Dividend Index still results in a significant 36.7% increase during the same period.

Technology has very quickly become the preferred sector for dividends no matter if investors favor quality, yield, or growth. The Nasdaq Technology Dividend Index complements broad based dividend strategies that tend to be underweight in technology.

Currently, the top ten components represent 56% of the index and include highly recognizable names including Apple, IBM, Cisco and others. The top ten are displayed below along with their current weight, most recent dividend payment, and indicated yield.

Data as of February 11, 2015
Source: Nasdaq Global Indexes, Bloomberg, FactSet

The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither The NASDAQ OMX Group, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding Nasdaq-listed companies are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.
 

Video: John Jacobs on The Future of Our Index Business By: John Jacobs
on 8/1/2014

John Jacobs, Executive Vice President, NASDAQ OMX Global Information Services, addresses the the future of our indexing business in the fifth installment of his video series.


Transcript: Let’s take a look at where we think NASDAQ OMX Global Indexes will be in a year or two down the road. As a global indexer with multi-asset classes, our near term strategy is to continue to roll out our superior technology on two fronts: The ability to calculate more indexes across more asset classes, so you’ll see us adding in more asset classes like fixed income and commodities. And the ability to have a superior data offering. We’re going to be able to offer data in a far more convenient fashion to the end user in a better way than it’s ever been offered before. So those are two near-term strategies. In addition, there’s been a tremendous movement and demand from the buy side and the sell side, those firms on the street, and those ultimate investors, for more custom capabilities and calculation, and we’re going to be offering a lot more custom indexes to partner with different firms, so they can find exactly what they want for their investment thesis. Whether they want geography or style or some other asset class, we’ll be able to provide that for them. So you’ll see a lot of growth in the custom [indexing]. You’ll continue to see us roll out more exchange traded products. You’ll see more structured products, and you’ll see a richer data set come out from us, both price data and weights and components. We also have recently announced that we’re acquiring eSpeed, which is a fixed income business, so you’ll be seeing a rich data set from fixed income, on-the-run treasuries, and an index family as well. So the next one to two years is going to be a very exciting time for NASDAQ OMX Global Indexes as we continue to fill out our mandate of multi-asset class, a scalable technology solution, create a better value proposition, and the richest, most robust data set in the index business.


Video: John Jacobs on The Importance of Scalable Technology By: John Jacobs
on 6/24/2014

John Jacobs, Executive Vice President, NASDAQ OMX Global Information Services, addresses the Importance of Scalable Technology in the second installment of his video series.


Transcript: To be a full service index calculator, and the world is moving to a smaller number of much larger full-service index calculators or indexers, you need a robust calculator. This business is moving to a model that’s built on scale, a technology scale. That is a strong spot of the NASDAQ OMX Group and we built the most scalable technology to trade securities around the planet. Now I say securities specifically, not just stocks, because we power a variety of different kinds of markets. So when it comes to an index calculation, you need to be able to calculate a variety of indexes across multiple asset classes; Not just equities, but commodities, you need to be able to do currencies, you need to be able to do fixed income and a variety of other things. It needs to be fast, it needs to be able to take in multiple data inputs, and it needs to be able to deliver that in a very robust data center that can be consumed by investors a lot of different ways. You can’t build that with a very expensive cost structure, it won’t be competitive. So that is the importance of having a technologically scalable index calculator at the core of your index business and we are very excited that we have built what we consider the absolute state-of-the-art best one on the planet.


Interested In Investing In Technology Stocks? By: John Jacobs
on 2/24/2014

 

Technology companies have always been classified as growth machines, aggressively reinvesting profits and thereby sowing the seeds of innovation and future profit growth. However, individual investments in tech stocks can be a polarizing subject amongst individual investors. This is primarily due to factors surrounding the competitive nature of management, culture and corporate governance. For these reasons, owning a basket of tech stocks in the form of an Exchange-Traded Fund (ETF) may be a better strategy for some people than individual stock selection. ETFs take nearly all of the individual fundamental attributes of stocks out of the equation, allowing investors to focus on select areas of the technology ecosystem.


The opportunities in technology and the sheer number of options available for ETF investors have never been more abundant. When allocating to a technology-focused ETF, key considerations should include (1) index selection (2) fund size and (3) strategy. Striking together an intuitive balance of funds with growth or income potential could add a supplementary facet to an otherwise traditional portfolio management approach.

Shopping for an ETF by trying to compare and contrast performance and individual fund characteristics is often times an arduous task. However, it doesn’t need to be when you consider that nearly all of the details on security selection are spelled out in plain black and white. You simply need to formulate what your portfolio goals are and how you can integrate an appropriate technology ETF into your portfolio to align with those goals.

Now that ETFs are considered a mainstay investment option for short and long term investors alike, sector ETFs encompassing every form of broad-based and industry-group specific strategies have amassed a bountiful landscape of imaginative and useful products.

One of the oldest solid-state products in existence that still contends popularity is the Technology Select Sector SPDR ETF (XLK). As the second largest technology ETF by assets under management, it was originally designed alongside it peers, the Select Sector SPDRS, to be part of the 10 individual sectors of the S&P 500 Index. XLK is market cap weighted, and envelopes the cross section of technology stocks strictly within the S&P 500. For this very reason, it carries a large concentration of large-cap stalwart tech names such as Apple AAPL +0.26% Inc. (AAPL), Google GOOG +1.15% Inc. (GOOG) and Microsoft MSFT -0.29%, Inc. (MSFT).

XLK offers investors an easy avenue of overweighting technology within a diversified portfolio of broad-based market indexes. However, it’s important to consider XLK’s lack of diversification outside tech names not admitted to the S&P 500. Which in turn leaves aside small- and mid-cap names in favor of large, well established companies with long operating histories.


Created through a collaboration of traditional index formulation and fundamental characteristic research, the First Trust Technology Alphadex Fund (FXL) is an ETF which ranks and then overweights companies with strong fundamental attributes. These traits include six and 12 month price appreciation, return on assets, book value to price and cash flow to price ratios. In the end, the top 75% of the screen marks 90 stocks for inclusion to the index ranging from small to large capitalization companies.

Investors seeking niche exposure in the world of technology stocks now have the option of investing in ETFs that target specific sub-sectors of technology. These products were created specifically for tactical investors that prefer a layer of diversification, but not at the expense of including an underperforming industry group within a specific sector.

Two examples of these ETFs are the First Trust Dow Jones Internet Index (FDN) and the PowerShares NASDAQ Internet Portfolio (PNQI). These ETFs are designed to track the largest, most liquid companies that generate at least half of their revenue from an internet related business. FDN’s top holdings include Facebook Inc. (FB), Amazon Inc. (AMZN) and eBay, Inc. (EBAY), while PQNI’s top holdings are also Facebook (FB) and eBay, Inc. (EBAY), as well as Google Inc. (GOOG). An aggressive investor might favor a position in FDN to hone in on the rapidly expanding growth of internet stocks engaged in content distribution or social networking versus companies engaged in the manufacturing and sales of technology hardware or software. Since FDN and PQNI are specialized strategies, it’s no surprise that their expense ratios are 0.60%, which is significantly higher than most broad-based ETFs.

Lastly, for investors seeking income from their invested capital, there is an index strategy that can leverage the strong free cash flow and healthy balance sheet attributes of mature technology and telecommunications companies. The First Trust NASDAQ Technology Dividend ETF (TDIV) tracks a specialized index that is comprised of companies across the capitalization structure that have a consistent history of paying dividends to shareholders. TDIV carries a current SEC Yield of 2.53%, and has an expense ratio of 0.50%. An investor looking to diversify a traditional equity income portfolio outside interest rate sensitive areas such as utilities or consumer staples stocks could utilize a fund like TDIV.

As the technology landscape has evolved over time, so have the need for products targeting multiple areas of the marketplace. ETFs have proven themselves to be one of the easiest and most efficient vehicles for exposure to individual sectors and industry groups. Evaluating and selecting the appropriate ETF for your underlying goals could ultimately yield the most favorable outcome, rather than investing in individual stocks.

*All performance statistics as of 2/3/14, data provided by Morningstar.com.

 

 

Sector Analysis: Technology Dividends Updated: 4/8/2013

Technology stocks and dividends were not synonymous just a few years ago. As the technology secotr has matured with increases in earnings, cash holdings, and stable levels of debt, returns to shareholders with dividend payments have substantially increased. In Q2 2013, Apple, the world’s largest company by market capitalization, will join the ranks of dividend payers by reinstating dividend payments; yield is expected to be around 1.8%. Apple joins other major technology names like Microsoft, Cisco and Intel, who have become strong dividend players over the years.

The tech dividend story is not limited to a handful of names; the entire sector has seen significant growth in dividend payments and was the fastest growing sector of dividends paid in the past five years.

Between 2005 and 2012, the technology sector of the NASDAQ U.S. Benchmark Index has increased its dividend value paid out by 326%. The next closest sector is Consumer Services at 139%.

The gains in the Technology sector dividend payments have also been more consistent compared to other sectors. The financial sector experienced rapid increases with a 33% increase between 2005 and 2008, but then a large 55% decline between 2008 and 2012.

Technology companies have been able to maintain and increase dividends due to the cash flows generated from their businesses. Looking at cash and marketable investments on hand, technology is the second largest sector behind financials with $58 billion. Technology companies have significant cash holdings and minimal creditors and as such are in the best position, compared to other sectors. Read the full report here

NASDAQ® and NASDAQ® are registered trademarks of The NASDAQ Group, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither The NASDAQ Group, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding NASDAQ-listed companies or NASDAQ proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.

© 2015. The NASDAQ Group, Inc. All Rights Reserved.

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