Mega-cap tech giants such as Microsoft, Apple, Meta, and Alphabet have profoundly influenced recent market gains, largely due to the boom in artificial intelligence (AI). As of now, the information technology and communication services sectors together make up nearly half of the S&P 500, raising concerns about portfolio volatility and the risks associated with dependence on the AI trade.
To mitigate these risks, experts recommend incorporating dividend growth ETFs. For instance, the Schwab U.S. Dividend Equity ETF (SCHD) includes 100 companies with a history of at least 10 consecutive years of dividend payments and emphasizes dividend quality, charging only 0.06%. Such ETFs offer substantial exposure to other sectors, including Health Care and Consumer Staples, which allows investors to diversify beyond mega-cap tech.
Additionally, the iShares Core Dividend Growth ETF (DGRO) requires companies to have five years of growing annual dividend payments, while the SPDR S&P Dividend ETF (SDY) focuses on companies that have increased dividends for at least 20 years, emphasizing potential resilience in the face of market fluctuations.
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