Should You Invest in the Utilities Select Sector SPDR ETF (XLU)?

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.

Investor-friendly, sector ETFs provide many options 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 $17.30 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 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 2.93%.

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, Nextera Energy Inc (NEE) accounts for about 12.40% of total assets, followed by Southern Co/the (SO) and Duke Energy Corp (DUK).

The top 10 holdings account for about 56.80% of total assets under management.

Performance and Risk

The ETF return is roughly 3.36% so far this year and it's up approximately 25.70% in the last one year (as of 04/16/2025). In that past 52-week period, it has traded between $64.08 and $82.93.

The ETF has a beta of 0.54 and standard deviation of 18.61% 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 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, XLU is an excellent 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 $6.71 billion. FUTY has an expense ratio of 0.08% and VPU charges 0.09%.

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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This article originally published on Zacks Investment Research (zacks.com).

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