Utility ETFs Provide Income And Performance
The standout sector this year has been utility stocks, currently up 18 percent year to date and hitting a new all-time high this week. During the recent 10-percent selloff in the broad market, it was one of the few survivors able to recapture old highs.
From an investor's view, the sector may be considered boring, but there is no argument the fact that the Dow Jones Utility Average is beating the Dow Jones Industrial Average by 18 percent this year. With hundreds of utilities to choose from, the best strategy may be an ETF that encompasses a large portion of the sector and eliminates any company-specific risk. Three of the larger utility ETFs are highlighted below.
The Utilities SPDR (ETF) (NYSE: XLU) tracks 32 companies across five subsectors of the utilities industry. Electrical utilities at 57 percent and multi-utilities at 39 percent are the most heavily weighted sub-sectors. The top individual holdings include Duke Energy Corp with a 9.5 percent, The Southern Company at 7.7 percent and NextEra Energy Inc coming in at 7.6 percent.
XLU is up 14 percent over the last 12 months and 4 percent over the last six months. The stock has finished the last four weeks up and is currently trying to break its all-time high of $44.36 set June 30. A breakout above this point would be a very bullish signal for the ETF. The ETF has an expense ratio of 0.16 percent and a dividend yield of 3.4 percent.
The Vanguard Utilities ETF (NYSE: VPU) tracks 78 companies across six subsectors within the utilities industry. Electrical utilities at 52 percent and multi-utilities making up 34 percent are the highest weighted subsectors. The ETFs individual holdings are similar to that of XLU with DUK at the top with an 8.1 percent allocation, followed by NEE at 6.3 percent and Dominion Resources, Inc. also at 6.3 percent.
VPU is up 14 percent over the last 12 months and 4 percent over the last six months. The stock recently broke through resistance at $95.30 in September and has slightly more resistance at $96.82, which is the all-time high, before a breakout is confirmed. The ETF has an expense ratio of 0.14 percent with a dividend yield of 3.5 percent.
The iShares Global Utilities ETF (NYSE: JXI) provides investors looking for a utility ETF option with more diversity around the globe. The portfolio is made up of 70 utility companies across 12 countries. With the most heavily weighted countries being the United States at 53 percent, the U.K. at 12 percent and Spain at 6 percent. The top individual holdings include DUK making up 5.4 percent of the fund, National Grid Plc at 5.2 percent and SO coming in at 4 percent.
JXI is up 6 percent over the last 12 months and down 0.5 percent over the last six months. The ETF has been up the last four days following a pullback and is currently sitting on the 50-day moving average. It has an expense ratio of 0.47 percent and pays a dividend yield of 3.4 percent.
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