Should You Invest in the Vanguard Utilities ETF (VPU)?

If you're interested in broad exposure to the Utilities - Broad segment of the equity market, look no further than the Vanguard Utilities ETF (VPU), a passively managed exchange traded fund launched on 01/26/2004.

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.

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 Vanguard. It has amassed assets over $6.74 billion, making it one of the largest ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. VPU seeks to match the performance of the MSCI US Investable Market Utilities 25/50 Index before fees and expenses.

The MSCI US Investable Market Utilities 25/50 Index comprises of stocks of large, mid-size, and small U.S. companies within the utilities sector.

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 2.99%.

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 99.90% of the portfolio.

Looking at individual holdings, Nextera Energy Inc (NEE) accounts for about 10.86% of total assets, followed by Southern Co/the (SO) and Duke Energy Corp (DUK).

The top 10 holdings account for about 51.72% of total assets under management.

Performance and Risk

The ETF has added about 4.38% and is up roughly 20.13% so far this year and in the past one year (as of 04/28/2025), respectively. VPU has traded between $144.84 and $179.11 during this last 52-week period.

The ETF has a beta of 0.55 and standard deviation of 18.33% for the trailing three-year period, making it a medium risk choice in the space. With about 71 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Utilities 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, VPU 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 Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. Fidelity MSCI Utilities Index ETF has $1.70 billion in assets, Utilities Select Sector SPDR ETF has $17.81 billion. FUTY has an expense ratio of 0.08% and XLU charges 0.08%.

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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