1 Sector ETF to Buy Before All of the Rest

NYSE: XLU | SPDR Select Sector Fund - Utilities News, Ratings, and Charts

XLU – The Utilities Select Sector SPDR Fund (XLU) has outperformed the broader market this year. As the utility sector usually holds up well in downturns, this ETF might be a solid buy in the current economic backdrop. Read more….

Utilities Select Sector SPDR Fund (XLU) employs a replication strategy to track the Utilities Select Sector Index. The fund provides exposure to the U.S. utility sector, a stock market space known for relatively low volatility and relatively high distribution yields.

The Federal Reserve announced another 75-basis-point interest rate hike and indicated that it would likely dish out more aggressive rate hikes to tame the worst inflation in decades. This has raised recession concerns.

However, a recession does not impact all sectors equally. Amid this backdrop, the utility sector is considered defensive because of the inelastic demand it enjoys.

Utilities Select Sector SPDR Fund has gained 10.7% over the past year and 9.6% over the past three months to close its last trading session at $72.60. In contrast, the S&P 500 has declined 14.5% and 0.1% over the same periods. XLU has gained 1.4% year-to-date, while the broader market declined 21.2% over the same period.

Here are the factors that could affect XLU’s performance in the near term:

Steady Fund Stats

As of September 22, XLU has $17.32 billion in assets under management and a NAV of $72.59. Its gross expense ratio of 0.10% is significantly lower than the category average of 0.43%. The fund has a net inflow of $3.45 billion over the past year and $3.31 billion over the past three months. XLU has a five-year monthly beta of 0.54.

Top Holdings

As of September 21, XLU’s top holdings include NextEra Energy, Inc. (NEE) with a 15.99% weight, The Southern Company (SO) with a 7.84% weight, Duke Energy Corporation (DUK) with a 7.78% weight, and Dominion Energy, Inc. (D) with a 6.37% weight.

Attractive Dividend

XLU’s annual dividend of $1.98 yields 2.96% on prevailing prices. Its dividend payouts have increased at a 2.9% CAGR over the past three years and a 3.6% CAGR over the past five years. The fund has a four-year average yield of 3.06% and 11 years of consecutive dividend growth.

POWR Ratings Reflect Promising Prospects

XLU’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

XLU has a Trade and Buy & Hold grade of A and a Peer grade of B. In the 13-ETF Utility ETFs group, it is ranked #1. The group is rated A.

Click here to see the POWR Ratings for XLU.

View all the top ETFs in the Utility ETFs group here.

Bottom Line

The interest rate hike has aggravated recessionary concerns in the economy. The utility sector usually holds up well in such an economic backdrop. As XLU has shown resilience, outperforming the broader market this year, and considering its strong fund statistics, this ETF might be a solid buy now.

How Does Utilities Select Sector SPDR Fund (XLU) Stack Up Against its Peers?

While XLU has an overall POWR Rating of A, one might consider looking at its industry peers, Vanguard Utilities Index Fund (VPU) and Fidelity MSCI Utilities Index ETF (FUTY), which also have an overall A (Strong Buy) rating.


XLU shares were trading at $71.67 per share on Friday morning, down $0.93 (-1.28%). Year-to-date, XLU has gained 2.29%, versus a -21.61% rise in the benchmark S&P 500 index during the same period.


About the Author: Anushka Dutta


Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...


More Resources for the Stocks in this Article

TickerPOWR RatingIndustry RankRank in Industry
XLUGet RatingGet RatingGet Rating
VPUGet RatingGet RatingGet Rating
FUTYGet RatingGet RatingGet Rating

Most Popular Stories on StockNews.com


:  |  News, Ratings, and Charts

Stocks Racing to Bottom

The S&P 500 (SPY) has raced 15% lower in just a few short weeks. Sure we might see a short term bounce here or there. Unfortunately most signs still point lower. Why is that the case? How much lower could we go? And what is the best way to trade this market? 40 year investment veteran Steve Reitmeister provides the answers in his new market outlook below...

:  |  News, Ratings, and Charts

2 Stocks Under $50 Worth Snapping up Right Now

With the market volatility and odds of recession perpetually increasing with every interest rate hike by the Federal Reserve, investors would be advised to load up on attractively priced stocks of businesses with robust demand and stable growth trajectory. Hence, fundamentally sound stocks Kroger (KR) and APA (APA), currently trading under $50, could be ideal investments. Keep reading…

:  |  News, Ratings, and Charts

3 Stocks You'll Want to Leave out of Your Retirement Portfolio

The stock market is experiencing wild swings amid the consecutive Federal rate hikes and deteriorating investor sentiments. Moreover, the aggressive rate hikes are raising recession concerns. Therefore, fundamentally weak stocks Uber Technologies (UBER), Workhorse Group (WKHS), and AppHarvest (APPH) might be best avoided for your retirement portfolio. Also, these stocks do not pay dividends. Read on…

:  |  News, Ratings, and Charts

The Worst Stock to Buy During Times of High Inflation

Rent the Runway (RENT) is slated to cut its workforce by 24% in the face of declining consumer spending amid soaring prices. Its subscriber count dropped in the last quarter. The stock has lost more than 70% year-to-date. Given the stubbornly high inflation, RENT might be best avoided. Keep reading…

:  |  News, Ratings, and Charts

3 Stocks You'll Want to Leave out of Your Retirement Portfolio

The stock market is experiencing wild swings amid the consecutive Federal rate hikes and deteriorating investor sentiments. Moreover, the aggressive rate hikes are raising recession concerns. Therefore, fundamentally weak stocks Uber Technologies (UBER), Workhorse Group (WKHS), and AppHarvest (APPH) might be best avoided for your retirement portfolio. Also, these stocks do not pay dividends. Read on…

Read More Stories

More SPDR Select Sector Fund - Utilities (XLU) News View All

Event/Date Symbol News Detail Start Price End Price Change POWR Rating
Loading, please wait...
View All XLU News