We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Should You Invest in the Utilities Select Sector SPDR ETF (XLU)?
Read MoreHide Full Article
Launched on 12/16/1998, the Utilities Select Sector SPDR ETF (XLU - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Utilities - Broad segment of the equity market.
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.
Sector ETFs are also funds of convenience, offering many 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 1, placing it in top 6%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $13.52 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
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 3.38%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 12.60% of total assets, followed by Southern Co/the (SO - Free Report) and Duke Energy Corp (DUK - Free Report) .
The top 10 holdings account for about 58.40% of total assets under management.
Performance and Risk
The ETF has lost about -8.74% and is down about -8.50% so far this year and in the past one year (as of 11/28/2023), respectively. XLU has traded between $56.19 and $72.67 during this last 52-week period.
The ETF has a beta of 0.56 and standard deviation of 18.04% for the trailing three-year period, making it a medium risk choice in the space. With about 32 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 $1.36 billion in assets, Vanguard Utilities ETF has $4.79 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.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Should You Invest in the Utilities Select Sector SPDR ETF (XLU)?
Launched on 12/16/1998, the Utilities Select Sector SPDR ETF (XLU - Free Report) is a passively managed exchange traded fund designed to provide a broad exposure to the Utilities - Broad segment of the equity market.
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.
Sector ETFs are also funds of convenience, offering many 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 1, placing it in top 6%.
Index Details
The fund is sponsored by State Street Global Advisors. It has amassed assets over $13.52 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
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 0.10%, making it one of the least expensive products in the space.
It has a 12-month trailing dividend yield of 3.38%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. 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 12.60% of total assets, followed by Southern Co/the (SO - Free Report) and Duke Energy Corp (DUK - Free Report) .
The top 10 holdings account for about 58.40% of total assets under management.
Performance and Risk
The ETF has lost about -8.74% and is down about -8.50% so far this year and in the past one year (as of 11/28/2023), respectively. XLU has traded between $56.19 and $72.67 during this last 52-week period.
The ETF has a beta of 0.56 and standard deviation of 18.04% for the trailing three-year period, making it a medium risk choice in the space. With about 32 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 $1.36 billion in assets, Vanguard Utilities ETF has $4.79 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.