News

Looking for broad exposure to the Utilities - Broad segment of the equity market? You should consider the Utilities Select Sector SPDR ETF (XLU), a passively managed exchange traded fund launched on 12/16/1998.

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.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 8, placing it in top 50%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $17.13 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

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.09%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 2.85%.

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) accounts for about 13.65% of total assets, followed by Southern Co/the (SO) and Duke Energy Corp (DUK).

The top 10 holdings account for about 58.49% of total assets under management.

Performance and Risk

The ETF return is roughly 25.13% and it's up approximately 25.10% so far this year and in the past one year (as of 12/12/2024), respectively. XLU has traded between $59.95 and $82.93 during this last 52-week period.

The ETF has a beta of 0.60 and standard deviation of 18.17% for the trailing three-year period, making it a medium risk choice in the space. With about 34 holdings, it has more concentrated exposure than peers.

Alternatives

Utilities Select Sector SPDR ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLU is an outstanding 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.

Fidelity MSCI Utilities Index ETF (FUTY) tracks MSCI USA IMI Utilities Index and the Vanguard Utilities ETF (VPU) tracks MSCI US Investable Market Utilities 25/50 Index. Fidelity MSCI Utilities Index ETF has $1.69 billion in assets, Vanguard Utilities ETF has $6.54 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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Utilities Select Sector SPDR ETF (XLU): ETF Research Reports

NextEra Energy, Inc. (NEE) : Free Stock Analysis Report

Southern Company (The) (SO) : Free Stock Analysis Report

Duke Energy Corporation (DUK) : Free Stock Analysis Report

Vanguard Utilities ETF (VPU): ETF Research Reports

Fidelity MSCI Utilities Index ETF (FUTY): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.