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The Undercovered Dozen spotlights 12 lesser-followed stocks featured on Seeking Alpha from Oct. 10 to Oct. 16. This curated series aims to surface overlooked investment ideas and foster discussion among sophisticated investors. Readers are encouraged to engage, debate, and share additional undercovered stock ideas in the community.
AI and chip stocks are turning into dividend growers, and popular dividend ETFs like FDVV already hold names such as Nvidia, Microsoft, Broadcom, and Alphabet among their top holdings. Free cash flow is fueling the raises: Nvidia produced $48.6B in a single quarter and lifted its dividend from $0.01 to $0.25, while Broadcom keeps almost half of every sale. TDIV and TDV give investors technology-heavy dividend growth in one fund, with TDIV growing its total payout 48.6% over five years and TDV raising its dividend 23% over the last five years.
Four major Q4 catalysts could support stocks, from holiday spending and strong earnings to midterm-election trends. Here are four ETFs positioned to benefit.
I assign First Trust NASDAQ Technology Dividend Index Fund (TDIV) a 'hold' rating, diverging from recent 'buy' consensus. Its 1.54% estimated dividend yield is a non-factor in this analysis. TDIV trades at a 35% P/E discount to XLK and offers ~20% EPS growth, but quality metrics lag. Historically, drawdown and recovery metrics are not favorable. XLK and other cap-weighted tech funds remain preferable for long-term tech exposure, as their materially higher portfolio-level EPS growth rates will lead to higher total retuns.
IBM shares rally despite a Q2 revenue miss as investors focus on AI momentum and margin expansion, shifting focus to ETFs exposed to the tech giant.
Oracle's AI spending plans rattle investors, but strong cloud growth, AI demand and ETF exposure keep the tech giant in focus.
First Trust NASDAQ Technology Dividend Index Fund ETF offers exposure to high-quality, dividend-paying technology companies with durable cash flows. TDIV has outperformed the S&P 500 since the last coverage, delivering a 57.5% total return and benefiting from AI sector expansion. While the current yield is modest at 1.2%, TDIV's 10-year dividend CAGR of 6.34% supports long-term income growth for patient investors.
Despite continued concentration in mega-cap technology stocks, US dividend-focused strategies have generally remained competitive and historically experienced more shallow drawdowns than broader equity markets. Last year, US companies paid a record US$704.8 billion in dividends - the 15th consecutive annual record. Concurrently, dividend growth accelerated across several international markets, highlighting the continued strength of shareholder-return trends.