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), a passively managed exchange traded fund launched on 12/16/1998.
Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also 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 $17.44 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
When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.
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 2.84%.
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) accounts for about 12.69% of total assets, followed by Southern Co/the (SO) and Duke Energy Corp (DUK).
The top 10 holdings account for about 58.07% of total assets under management.
Performance and Risk
The ETF return is roughly 4.36% and was up about 34.78% so far this year and in the past one year (as of 02/11/2025), respectively. XLU has traded between $59.96 and $82.93 during this last 52-week period.
The ETF has a beta of 0.62 and standard deviation of 18.26% 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 $1.67 billion in assets, Vanguard Utilities ETF has $6.70 billion. FUTY has an expense ratio of 0.08% and VPU charges 0.09%.
Bottom Line
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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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
