Looking for broad exposure to the Utilities - Broad segment of the equity market? You should consider the iShares U.S. Utilities ETF (
IDU Quick Quote IDU - Free Report) , a passively managed exchange traded fund launched on 06/12/2000.
Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.
Additionally, sector ETFs offer convenient ways 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 5, placing it in top 31%.
The fund is sponsored by Blackrock. It has amassed assets over $1.04 billion, making it one of the average sized ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. IDU seeks to match the performance of the Dow Jones U.S. Utilities Index before fees and expenses.
The Russell 1000 Utilities RIC 22.5/45 Capped Index measures the performance of the utilities sector of the U.S. equity market. It includes companies in the following sectors: electricity and gas, water and multi-utilities.
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.39%, making it one of the cheaper products in the space.
It has a 12-month trailing dividend yield of 2.29%.
Sector Exposure and Top Holdings
It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Utilities sector--about 90% of the portfolio, followed by Industrials.
Looking at individual holdings, Nextera Energy Inc (
NEE Quick Quote NEE - Free Report) accounts for about 13.79% of total assets, followed by Duke Energy Corp ( DUK Quick Quote DUK - Free Report) and Southern ( SO Quick Quote SO - Free Report) .
The top 10 holdings account for about 52.60% of total assets under management.
Performance and Risk
The ETF has gained about 1.19% and is up roughly 5.54% so far this year and in the past one year (as of 11/24/2022), respectively. IDU has traded between $76.38 and $95.89 during this last 52-week period.
The ETF has a beta of 0.51 and standard deviation of 26.27% for the trailing three-year period, making it a medium risk choice in the space. With about 48 holdings, it has more concentrated exposure than peers.
IShares U.S. Utilities ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IDU is a great option for investors seeking exposure to the Utilities/Infrastructure ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.
Vanguard Utilities ETF (
VPU Quick Quote VPU - Free Report) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF ( XLU Quick Quote XLU - Free Report) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $5.74 billion in assets, Utilities Select Sector SPDR ETF has $16.21 billion. VPU has an expense ratio of 0.10% and XLU charges 0.10%. Bottom Line
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Zacks ETF Center.