Our approach in the AAMA High Dividend Growth ETF has been to combine ETFs that are based on dividend indices that have historically indicated relative strength in the market environment we identify. We then round out the portfolio with sector funds that represent lower historical volatility, and that also line up with our general sector valuation work.
At the beginning of 2020 we owned two dividend ETFs. One of these did poorly in the decline and initial rebound. This ETF was clearly dominated by dividend shrinkers and more leveraged companies. We sold it in April. The second did relatively well and remains in the portfolio.
In terms of sector exposure, we have liked technology and have included a technology dividend fund that filters tech stocks with certain dividend screens. This holding has been gradually pared back as the technology sector has become increasingly over-valued and more volatile. With this update, we adjusted our broader sector ETF allocations to align with our valuation and volatility convictions.
Additionally, in April we added a 10% allocation to preferred stocks. These holdings have reduced volatility in the portfolio. Given that preferred stock ETFs are heavily dominated by bank issues, we do not expect to increase this allocation.