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Top 10 Utilities ETFs

Stocks in this article: AXUT RYU DBU PSCU PUI

Utility investments are at the conservative end of investing. Most investors buy them for the steady dividends and lower market volatility. This feature hasn't changed much.

There is currently an expanding list of 24 ETFs oriented to the utility and infrastructure sector with more on the way. The following analysis features a fair representation of ETFs available. We believe from these investors may choose an appropriate ETF to satisfy the best index-based offerings individuals and financial advisors may utilize.

Currently utilities are under significant regulatory and macro-economic pressure. From a regulatory view most utilities need a more contemporary grid but the climate is uncertain given a wide variety of local issues from communities.

Atop this are fuel issues including whether to upgrade older plants with cheap and readily available coal, natural gas, oil or nuclear. Hydro-electric systems seem completely stopped from an environmental view and most available sources have been tapped. Nuclear power seems safe enough for new plants but with an old Fukushima plant and disaster in the publics' mind these seem an unlikely source unfortunately. Oil powered utilities are more acceptable but fuel costs are high. Alternative (green) energy is still unavailable in the amount necessary and is more costly. The best bet is natural gas as an intermediate source if fracking controversies can be satisfied and overcome.

Another drag on public utilities is the economic climate. When the economy slows power use drops as well. Perhaps the best example is the high number of vacant homes in the U.S. currently with unused meters.

ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones, Wisdom Tree, PowerShares, EG Shares and so forth. Also included are some so-called "enhanced" indexes that attempt to achieve better performance through more active management of the index. Investors should note the holdings we have listed and compare one issue to another in this regard.

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

#10: iShares Utilities ex-US ETF (AXUT)

AXUT follows the MSCI All Country World ex-USA Utilities Index which is a market cap weighted index of developed and emerging market countries. The fund was launched in July 2010. The expense ratio is .48%. AUM equal $2.2 million and average daily trading volume is only 1K shares. As of mid-February 2012 the annual dividend yield was 4.66% and YTD return 7.61%. The one year return was -14.83%

With a fund this young but with a sponsor this big you would intuitively believe the fund has a better chance of succeeding versus with a smaller sponsor. Much of the poor growth is due to much unsettled economic issues globally.

Data as of First Quarter 2012

AXUT Top Ten Holdings & Weightings

  1. E.ON Aktiengesellschaft (EOAN): 6.77%
  2. National Grid PLC (NG.): 6.12%
  3. GDF Suez (GSZ): 5.93%
  4. ENEL Ente Nazionale per L'Energ Elet SPA (ENEL): 4.69%
  5. Centrica PLC (CPYYF): 4.23%
  6. Iberdrola SA (IBE): 4.07%
  7. Rwe AG (RWE): 3.28%
  8. SSE Plc. (SSEZF): 3.19%
  9. CLP Holdings Limited (CLPHF): 2.89%
  10. Hong Kong and China Gas Co., Ltd. (00003): 2.19%

#9: Rydex Equal Weight Utilities ETF (RYU)

RYU follows the S&P Equal Weight Index which is not much different from XLU except that by breaking components into equal weights provides a different and perhaps fairer view of overall conditions. The fund was launched in January 2006. The expense ratio is .50%. AUM equal $49 million and average daily trading volume is 17K shares. (NOTE: The sponsor has suffered numerous ownership changes and marketing efforts have been hindered. The structure of the index is sound but the liquidity and fees are still higher than average.)

Remember the advantage of an equal weighted index-based ETF is an investor won't be hurt by a bad situation in one but won't be helped by a better performer either. As of mid-February 2012 the annual dividend yield was 3.40% and YTD return -1.98%. The one year return was 8.15=4%

Data as of First Quarter 2012

RYU Top Ten Holdings & Weightings

  1. AES Corp (AES): 2.75%
  2. Sempra Energy (SRE): 2.67%
  3. MetroPCS Communications Inc (PCS): 2.63%
  4. CenturyLink Inc (CTL): 2.61%
  5. SCANA Corp (SCG): 2.60%
  6. CMS Energy Corp (CMS): 2.60%
  7. Edison International (EIX): 2.59%
  8. Windstream Corp (WIN): 2.59%
  9. DTE Energy Holding Company (DTE): 2.57%
  10. NextEra Energy Inc (NEE): 2.57%

#8: WisdomTree Global ex-U.S. Utility ETF (DBU)

DBU follows the WisdomTree Global ex-US Utility Index which follows utility equities from emerging and developed countries with the top 100 by market capitalization included in the index. The fund was launched in October 2006. The expense ratio is .58%.

AUM equal $32 million and average daily trading volume is 15K shares. As of mid-February 2012 the annual dividend yield was 4.30% and YTD return 5.91%. The one year return was -8.19%

Data as of First Quarter 2012

DBU Top Ten Holdings & Weightings

  1. Light S.A. (LIGT3): 3.18%
  2. Drax Group PLC (DRX): 2.31%
  3. AES Tiete S.A. (GETI3): 2.28%
  4. Energy Company of Minas Gerais (CMIG3): 2.23%
  5. Aguas Andinas S.A.: 2.02%
  6. Just Energy Group Inc (JE): 1.85%
  7. AGL Energy Limited (AGK): 1.76%
  8. Rwe AG (RWE): 1.74%
  9. E.ON Aktiengesellschaft (EOAN): 1.72%
  10. CIA Saneamento De Minas Gerais-COPASA MG (CSMG3): 1.63%

#7: PowerShares Small-Cap Utilities ETF (PSCU)

PSCU follows the S&P Small-Cap 600 Utilities Index which takes the Small-Cap 600 utility equity components to form the index. The fund was launched in April 2010.

The expense ratio is .29%. AUM equal $49 million and average daily trading volume is 9K shares. As of mid-February 2012 the annual dividend yield was 3.02% and YTD return 2.21%. The one year return was 14.24%

Data as of First Quarter 2012

PSCU Top Ten Holdings & Weightings

  1. Piedmont Natural Gas Company (PNY): 10.27%
  2. New Jersey Resources Corporation (NJR): 8.54%
  3. Southwest Gas Corporation (SWX): 8.17%
  4. UIL Holdings Corporation (UIL): 7.47%
  5. South Jersey Industries (SJI): 7.17%
  6. ALLETE, Inc. (ALE): 4.56%
  7. El Paso Electric Company (EE): 4.55%
  8. NorthWestern Corporation (NWE): 4.55%
  9. Northwest Natural Gas (NWN): 4.47%
  10. CH Energy Group Inc (CHG): 4.46%

#6: PowerShares Dynamic Utilities ETF (PUI)

PUI follows the Dynamic Utilities Intellidex Index which is a so-called "enhanced" index since rather than a passive index approach the index is designed to select constituents using quantitative analytics intended to provide the greatest return. The fund was launched in October 2005.

The expense ratio is .60%. AUM equal $47 million and average daily trading volume is 17K shares. As of mid-February 2012 the annual dividend yield was 2.81% and YTD return 2.52%. The one year return was 6.32%

Data as of First Quarter 2012

PUI Top Ten Holdings & Weightings

  1. Crown Castle International Corp (CCI): 2.61%
  2. Verizon Communications Inc (VZ): 2.61%
  3. Comcast Corp A (CMCSA): 2.60%
  4. Duke Energy Corporation (DUK): 2.56%
  5. American Electric Power Co Inc (AEP): 2.56%
  6. AT&T Inc (T): 2.54%
  7. Xcel Energy Inc (XEL): 2.52%
  8. Southern Co (SO): 2.51%
  9. Progress Energy, Inc. (PGN): 2.50%
  10. Consolidated Edison, Inc. (ED): 2.50%

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