fbpx
QQQ
+ 0.00
335.20
+ 0%
DIA
+ 0.00
338.10
+ 0%
SPY
+ 0.00
412.27
+ 0%
TLT
+ 0.00
140.39
+ 0%
GLD
+ 0.00
167.06
+ 0%

Where The Cash Is At Among Sector ETFs

by
September 20, 2016 8:26 am
Share to Linkedin Share to Twitter Share to Facebook Share to Print License More

Up nearly 12 percent year-to-date, the Technology SPDR (ETF) (NYSE: XLK) is the third-best sector SPDR exchange-traded fund this year. That alone implies XLK, the largest technology ETF by assets, merits another look, but there are more reasons to revisit XLK and rival technology ETFs.

It’s More Than Just Size

As has been previously noted, the technology sector, the largest sector allocation in the S&P 500, is home to some of the most cash-rich companies in the United States. Sure, the likes of Apple Inc. (NASDAQ: AAPL) and Google parent Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) stash the majority of their cash overseas, but that does not change the fact that some XLK holdings have bundles of green.

In fact, XLK and competing tech ETFs are akin to the 1 percent.

The 1%

“The top 1 percent of cash-rich companies, of all US companies, control over 50 percent of all US corporate cash. Of that top 1 percent, the five most cash-rich companies are Apple, Microsoft, Google, Cisco, and Oracle, all of which hold the majority of their cash in overseas locations,” said Rareview Macro founder Neil Azous in a note out Monday.

Related Link: Social Media ETF Still Offers Growth Potential

The stocks mentioned by Azous combine for nearly 42 percent of XLK's weight, though the comments were made more in relation to opportunities with corporate bonds issued by these tech titans. Azous noted that technology corporate bonds are being assigned higher risk premiums due to concerns of higher taxation overseas and the use of corporate debt to fund buyback programs.

Looking At LQD, Too

The iShares iBoxx $ Invest Grade Corp Bd Fd (NYSE: LQD), the largest corporate bond ETF, features four members of XLK's top 10 holdings among its top 10 roster, including Apple and Microsoft Corporation (NASDAQ: MSFT).

In addition to being one of the biggest contributors to the buyback boom of recent years, technology stocks have also been major drivers of the S&P 500's dividend growth since the financial crisis. In fact, technology is now one of the benchmark U.S. equity index's biggest dividend-paying groups in dollar terms.

XLK's trailing 12-month dividend yield, though not whopping at just under 1.8 percent, is still several basis points higher than the yield on 10-year Treasurys.

Although it is home to some of Corporate America's most prolific cash generators, XLK has lost $1.77 billion in assets this year.

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you’d like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!


Related Articles

Jim Cramer Thinks Chipotle Stock Can Go 'Much Higher'

Chipotle Mexican Grill, Inc. (NYSE: CMG) is an amazing stock, Jim Cramer said Thursday on CNBC's "Squawk On The Street." People don't like the Chipotle stock enough, Cramer noted, and "There's Chipotle and then there's everybody else." read more

Apple, Facebook Shares Look To Be Prepping For Earnings Next Week

Apple Inc (NASDAQ: AAPL) and Facebook Inc (NASDAQ: FB) started the month of April with big bullish moves that helped revive the Nasdaq 100 and push the S&P 500 to new highs. read more

Why This Apple Analyst Is Excited

When he was on CNBC's "Squawk Box" Wednesday, CFRA Research analyst Angelo Zino restated a buy rating on Apple Inc (NASDAQ: AAPL) for investors with a longer-term horizon. read more

The SPY, QQQ And DIA All Plunged Today. Here's Why.

U.S. indices continued lower Tuesday amid weakness in tech stocks and potential profit-taking in financials and growth names.  read more