Should You Invest in the Invesco S&P 500 Equal Weight Utilities ETF (RYU)?

The Invesco S&P 500 Equal Weight Utilities ETF (RYU) was launched on 11/01/2006, and is a passively managed exchange traded fund designed to offer 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 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 2, placing it in top 13%.

Index Details

The fund is sponsored by Invesco. It has amassed assets over $288.11 million, making it one of the average sized ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. RYU seeks to match the performance of the S&P 500 Equal Weight Telecommunication Services & Utilities Index before fees and expenses.

This index is an unmanaged equal weighted version of the S&P 500 Utilities Index that consists of common stocks of the following industries: electric utilities, gas utilities, multi-utilities & unregulated power & water utilities,telecommunication service companies, including fixed-line, cellular, wireless, high bandwidth & fiber-optic cable networks.

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 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 3.25%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many 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, Ameren Corp (AEE) accounts for about 4.16% of total assets, followed by American Water Works Co Inc (AWK) and Xcel Energy Inc (XEL).

The top 10 holdings account for about 39.95% of total assets under management.

Performance and Risk

The ETF has lost about -20.76% and is down about -10.26% so far this year and in the past one year (as of 04/02/2020), respectively. RYU has traded between $72.27 and $115.50 during this last 52-week period.

The ETF has a beta of 0.46 and standard deviation of 21.68% for the trailing three-year period, making it a medium risk choice in the space. With about 28 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco S&P 500 Equal Weight Utilities 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, RYU is a reasonable 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.

Vanguard Utilities ETF (VPU) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $3.65 billion in assets, Utilities Select Sector SPDR ETF has $9.55 billion. VPU has an expense ratio of 0.10% and XLU charges 0.13%.

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.

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