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Should You Invest in the Utilities Select Sector SPDR ETF (XLU)?
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If you're interested in broad exposure to the Utilities - Broad segment of the equity market, look no further than the Utilities Select Sector SPDR ETF (XLU - Free Report) , a passively managed exchange traded fund launched on 12/16/1998.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $15.57 billion, making it the largest ETF attempting to match the performance of the Utilities - Broad segment of the equity market. XLU seeks to match the performance of the Utilities Select Sector Index before fees and expenses.
The Utilities Select Sector Index seeks to provide an effective representation of the Utilities sector of the S&P 500 Index.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.84%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Utilities sector--about 100% of the portfolio.
Looking at individual holdings, Nextera Energy Inc. (NEE - Free Report) accounts for about 15.89% of total assets, followed by Duke Energy Corporation (DUK - Free Report) and Southern Company (SO - Free Report) .
The top 10 holdings account for about 62.53% of total assets under management.
Performance and Risk
The ETF has added about 0.56% so far this year and was up about 9.14% in the last one year (as of 05/11/2022). In that past 52-week period, it has traded between $63.23 and $76.96.
The ETF has a beta of 0.46 and standard deviation of 25.12% for the trailing three-year period, making it a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
Utilities Select Sector SPDR ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XLU is a sufficient option for those seeking exposure to the Utilities/Infrastructure ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Fidelity MSCI Utilities Index ETF (FUTY - Free Report) tracks MSCI USA IMI Utilities Index and the Vanguard Utilities ETF (VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index. Fidelity MSCI Utilities Index ETF has $1.39 billion in assets, Vanguard Utilities ETF has $5.91 billion. FUTY has an expense ratio of 0.08% and VPU charges 0.10%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Should You Invest in the Utilities Select Sector SPDR ETF (XLU)?
If you're interested in broad exposure to the Utilities - Broad segment of the equity market, look no further than the Utilities Select Sector SPDR ETF (XLU - Free Report) , a passively managed exchange traded fund launched on 12/16/1998.
While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.
Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 7, placing it in top 44%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $15.57 billion, making it the largest ETF attempting to match the performance of the Utilities - Broad segment of the equity market. XLU seeks to match the performance of the Utilities Select Sector Index before fees and expenses.
The Utilities Select Sector Index seeks to provide an effective representation of the Utilities sector of the S&P 500 Index.
Costs
Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.
Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 2.84%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Utilities sector--about 100% of the portfolio.
Looking at individual holdings, Nextera Energy Inc. (NEE - Free Report) accounts for about 15.89% of total assets, followed by Duke Energy Corporation (DUK - Free Report) and Southern Company (SO - Free Report) .
The top 10 holdings account for about 62.53% of total assets under management.
Performance and Risk
The ETF has added about 0.56% so far this year and was up about 9.14% in the last one year (as of 05/11/2022). In that past 52-week period, it has traded between $63.23 and $76.96.
The ETF has a beta of 0.46 and standard deviation of 25.12% for the trailing three-year period, making it a medium risk choice in the space. With about 31 holdings, it has more concentrated exposure than peers.
Alternatives
Utilities Select Sector SPDR ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, XLU is a sufficient option for those seeking exposure to the Utilities/Infrastructure ETFs area of the market. Investors might also want to consider some other ETF options in the space.
Fidelity MSCI Utilities Index ETF (FUTY - Free Report) tracks MSCI USA IMI Utilities Index and the Vanguard Utilities ETF (VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index. Fidelity MSCI Utilities Index ETF has $1.39 billion in assets, Vanguard Utilities ETF has $5.91 billion. FUTY has an expense ratio of 0.08% and VPU charges 0.10%.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.