Top 10 Utilities ETFs

Our goal in this profile is to help investors wade through the many competing ETF offerings available. Using our long experience as an ETF publication , and nearly 40 years in the investment business, we can help select those ETFs that matter and may or may not be repetitive. The result is a more manageable list of issues from which to view and make selections.

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.

Below is the methodology for ranking the ETFs within the category.

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.

ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones and so forth. Also included are some so-called "enhanced" indexes that attempt to achieve better performance through more active management of the index.

Where competitive issues exist and/or repetitive issues available at a fee cost saving we mention those as other choices. New issues are coming to market consistently (especially globally) and sometimes these issues will need to become more seasoned before they may be included at least in our listings.

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.

XLU (SPDR Utilities Sector ETF) follows the Utilities Select Sector Index covers most publicly traded U.S. utilities, multi-utilities, independent power producers & traders and gas utilities. The fund was launched in December 1998. The expense ratio is .20%. AUM (Assets under Management) equal $7 billion and average daily trading volume is 12M shares. As of early November 2011 the annual dividend yield was 4.02% 3.50% and YTD return 15.64%.

Inverse and leveraged issues are available from ProShares.

Data as of November 2011

XLU Top Ten Holdings & Weightings
  1. Southern Co (SO): 8.76%
  2. Exelon Corp (EXC): 6.95%
  3. Dominion Resources Inc (D): 6.94%
  4. Duke Energy Corporation (DUK): 5.93%
  5. NextEra Energy Inc (NEE): 5.63%
  6. American Electric Power Co Inc (AEP): 4.50%
  7. FirstEnergy Corp (FE): 4.44%
  8. PG&E Corp (PCG): 4.10%
  9. Consolidated Edison, Inc. (ED): 4.03%
  10. Public Service Enterprise Group Inc (PEG): 4.03%

VPU (Vanguard Utilities ETF) follows the MSCI US Investable Market Utilities 25/50 Index which consists of small, medium and large companies. The fund was launched in January 2004. The expense ratio is .25%. AUM equal $936 million and average daily trading volume is 100K shares. As of early November 2011 the annual dividend yield was 3.62% and YTD return 15%.

 

Data as of November 2011

VPU Top Ten Holdings
  1. Southern Co (SO): 6.56%
  2. Exelon Corp (EXC): 5.54%
  3. Dominion Resources Inc (D): 5.48%
  4. Duke Energy Corporation (DUK): 4.89%
  5. NextEra Energy Inc (NEE): 4.49%
  6. FirstEnergy Corp (FE): 3.61%
  7. American Electric Power Co Inc (AEP): 3.54%
  8. PG&E Corp (PCG): 3.25%
  9. Public Service Enterprise Group Inc (PEG): 3.23%
  10. PPL Corp (PPL): 3.07%

IDU (iShares DJ U.S. Utilities ETF) follows the Dow Jones U.S. Utilities Index which also covers the broad spectrum of the utilities sector of the U.S. equity market. The fund was launched in June 2000. The expense ratio is .48%. AUM equal $700 million and average daily trading volume is 90K shares. As of late early November 2011 the annual dividend yield was 3.50% and YTD return nearly 9%.

Data as of November 2011

IDU Top Ten Holdings & Weightings
  1. Southern Co (SO): 6.91%
  2. Dominion Resources Inc (D): 5.48%
  3. Exelon Corp (EXC): 5.47%
  4. Duke Energy Corporation (DUK): 5.03%
  5. NextEra Energy Inc (NEE): 4.43%
  6. American Electric Power Co Inc (AEP): 3.54%
  7. FirstEnergy Corp (FE): 3.51%
  8. Spectra Energy Corp (SE): 3.46%
  9. PG&E Corp (PCG): 3.22%
  10. Public Service Enterprise Group Inc (PEG): 3.20%

JXI (iShares Global Utilities ETF) follows the S&P Global Utilities Index which follows the performance of the global equity market. The fund was launched in September 2006. The expense ratio is .48%. AUM equal $251 million and average daily trading volume is 52K shares. As of early November the annual dividend yield 4.20 % and YTD return -1.54%%.

Data as of November 2011

JXI Top Ten Holdings & Weightings
  1. E.ON Aktiengesellschaft (EOAN): 5.43%
  2. GDF Suez (GSZ): 4.58%
  3. Southern Co (SO): 4.11%
  4. National Grid PLC (NG.): 3.93%
  5. Enel Societa Per Azioni (ENEL): 3.41%
  6. Iberdrola, S.A. (IBE): 3.33%
  7. Exelon Corp (EXC): 3.27%
  8. Dominion Resources Inc (D): 3.26%
  9. Duke Energy Corporation (DUK): 3.01%
  10. Centrica PLC (CPYYF): 2.75%

PUI (PowerShares Dynamic Utilities ETF) 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 $50 million and average daily trading volume is 18K shares. As of early November 2011 the annual dividend was yield was 3.60% and YTD of 6.11%.

Data as of November 2011

PUI Top Ten Holdings & Weightings
  1. Progress Energy, Inc. (PGN): 2.72%
  2. Duke Energy Corporation (DUK): 2.69%
  3. Edison International (EIX): 2.65%
  4. FirstEnergy Corp (FE): 2.63%
  5. Dominion Resources Inc (D): 2.61%
  6. Southern Co (SO): 2.59%
  7. American Tower Corp A (AMT): 2.59%
  8. Motorola Solutions, Inc. (MSI): 2.58%
  9. Verizon Communications Inc (VZ): 2.57%
  10. Consolidated Edison, Inc. (ED): 2.56%

FXU (First Trust Utilities AlphaDEX ETF) follows the StrataQuant Index which is another "enhanced" index designed around quantitative methodologies by the NYSE Euronext employing the AlphaDEX system of constituent selection from the Russell 1000 Index. The fund was launched in May 2007. The expense ratio is .70%. AUM equal $270 million with average daily trading volume of 270K shares. As of late July 2011 the annual dividend was yield and YTD of 8.47%.

Data as of November 2011

FXU Top Ten Holdings & Weightings
  1. Public Service Enterprise Group Inc (PEG): 3.72%
  2. Edison International (EIX): 3.59%
  3. Entergy Corp (ETR): 3.53%
  4. Great Plains Energy Inc (GXP): 3.38%
  5. AT&T Inc (T): 3.30%
  6. ONEOK, Inc. (OKE): 3.24%
  7. NiSource Inc (NI): 3.07%
  8. Dominion Resources Inc (D): 3.06%
  9. CenturyLink Inc (CTL): 2.98%
  10. tw telecom inc (TWTC): 2.92%

PSCU (PowerShares SmallCap Utilities ETF) follows the S&P SmallCap 600 Utilities Index which takes the SmallCap 600 utility equity components to form the index. The fund was launched in April 2010. The expense ratio is .29%. AUM equal $46 million and average daily trading volume is 6K shares. As of early November 2011 the annual dividend yield was 3.29% and YTD return 7.70%.

Data as of November 2011

PSCU Top Ten Holdings & Weightings
  1. Piedmont Natural Gas Company (PNY): 9.58%
  2. New Jersey Resources Corporation (NJR): 8.13%
  3. UIL Holdings Corporation (UIL): 7.67%
  4. Southwest Gas Corporation (SWX): 7.65%
  5. South Jersey Industries (SJI): 6.88%
  6. Laclede Group, Inc. (LG): 4.67%
  7. El Paso Electric Company (EE): 4.59%
  8. Avista Corporation (AVA): 4.54%
  9. Northwest Natural Gas (NWN): 4.51%
  10. NorthWestern Corporation (NWE): 4.49%

DBU (WisdomTree Global ex-U.S. Utility ETF) 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 $31 million and average daily trading volume is 15K shares. As of early November 2011 the annual dividend yield was 4.92% and YTD return -5.05 %.

Data as of November 2011

DBU Top Ten Holdings & Weightings
  1. Light S.A. (LIGT3): 3.11%
  2. Drax Group PLC (DRX): 2.31%
  3. AES Tiete S.A. (GETI3): 2.16%
  4. E.ON Aktiengesellschaft (EOAN): 1.93%
  5. Rwe AG (RWE): 1.92%
  6. Aguas Andinas S.A.: 1.89%
  7. Energy Company of Minas Gerais (CMIG3): 1.79%
  8. AGL Energy Limited (AGK): 1.75%
  9. EDP - Energias de Portugal SA (EDP): 1.71%
  10. Tohoku Electric Power Company, Inc. (9506): 1.68%

RYU (Rydex Equal Weight Utilities ETF) 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 $33 million and average daily trading volume is 7K 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.) As of early November 2011 the annual dividend yield was 3.53% and YTD return 8.70%.

Data as of November 2011

RYU Top Ten Holdings & Weightings
  1. ONEOK, Inc. (OKE): 2.68%
  2. Edison International (EIX): 2.60%
  3. Integrys Energy Group Inc (TEG): 2.55%
  4. Entergy Corp (ETR): 2.54%
  5. SCANA Corp (SCG): 2.54%
  6. Ameren Corp (AEE): 2.53%
  7. American Electric Power Co Inc (AEP): 2.53%
  8. Duke Energy Corporation (DUK): 2.52%
  9. CenterPoint Energy Inc (CNP): 2.51%
  10. Dominion Resources Inc (D): 2.50%

AXUT (iShares Utilities ex-US ETF) 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 early November 2011 the annual dividend yield was 7.58% and YTD return of -12.70%. With a fund this young but with a sponsor this big you would intuitively believe the fund will grow over time given the unique structure.

An alternative is another relatively young issue from EG shares--UGEM (GEMS Utilities ETF) follows the Dow Jones Emerging Markets Utilities Titans Index. It was launched in June 2011. It bears watching as well.

Data as of November 2011

AXUT Top Ten Holdings & Weightings
  1. GDF Suez (GSZ): 6.79%
  2. E.ON Aktiengesellschaft (EOAN): 6.68%
  3. National Grid PLC (NG.): 5.99%
  4. ENEL Ente Nazionale per L'Energ Elet SPA (ENEL): 5.26%
  5. Iberdrola SA (IBE): 5.11%
  6. Centrica PLC (CPYYF): 4.16%
  7. SSE Plc. (SSEZF): 3.37%
  8. CLP Holdings Limited (CLPHF): 3.35%
  9. Rwe AG (RWE): 2.67%
  10. Chubu Electric Power Co., Inc: 2.19%

The utility sector has enjoyed a positive first half of 2011 particularly for U.S. investors in terms of total return. Buyers in this sector are generally conservative and income oriented although current dividends are historically low but not compared to cash equivalents. The industry tends to suffer with weak economic growth as demand is reduced theoretically. Further environmental issues plague expansion as do regulatory constraints. Nevertheless people and industry need power as a basic necessity.  

There is a lot to choose from in terms of indexes linked to ETFs. Some are passive and duplicative relatively. It's essential to remember it's really a game of battleship for sponsors seeking to be first to a sector space or just being competitive in the space. Investors should note that in a rising market particularly ETFs linked to enhanced issues will tend to outperform conventional index linked issues. 

New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned.

As stated with other sectors, remember ETF sponsors must issue and their interests aren't necessarily aligned with yours. They have a business interest and wish to have a competitive presence in any popular sector.

For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

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The ETF Digest is long XLU.

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(Source for data is from ETF sponsors and various ETF data providers

 

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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