In an era where electricity demand is strong and growing, the utilities sector has emerged as a crucial player in the economic landscape.
The Utilities Select Sector SPDR Fund (XLU) offers focused exposure to this key sector of the economy and everyday life. It is comprised of all the utilities companies in the S&P 500.
Most people pay their power bill directly to the provider which eliminates any intermediaries. This steady stream of revenue is reliable because customers are generally prompt with their payments to avoid any disruptions in their essential services like lighting, television, or internet provided by the utility.
Driving Forces Behind XLU
The top 10 holdings* of the Utilities sector ETF, XLU, have all the key players in the industry, and they represent nearly 60% of the fund. The top holding is NextEra Energy and represents 14.78% of the ETF, followed by Southern Co. at 8.08%, Duke Energy at 7.49%, Sempra Energy at 4.83%, Dominion Energy at 4.44%, American Electric Power Co. at 4.41%, Exelon Corp. at 4.36%, Constellation Energy at 3.70%, Xcel Energy at 3.44%, and Consolidated Edison at 3.37%.
XLU holds 30 public utility companies in total. The built-in diversification comes from the fact the companies represent every part of the U.S., so mitigation of one underperforming utility wont upset the apple cart.
Utility companies have embraced and deployed renewable energy sources for both the sake of the environment and for the bottom line.
Increased Demand for Electricity
Furthermore, the increasing demand for electricity is another factor driving the growth of the utility sector. With the widespread adoption of electronic devices and electric vehicles across the nation, the need for electricity is steadily rising.
The high demand for electricity across multiple industries poses significant opportunities for all utility companies. They must adapt to meet the rising energy requirements, invest in infrastructure upgrades, and expand their generation capacity.
XLU maintains a reliable exposure to large cap utility companies. With more than $14 billion in assets under management and a reasonable 0.10%** expense ratio, it is a sector that everyone depends on to keep the lights on.
Significant daily trading volume keep spreads low, which helps investors both buying and selling the ETF.
For investors truly seeking a diversified portfolio, the utility sector represented by the index fund XLU could be a brick in the wall of their holdings. Keeping the lights on and customers paying for that service has a bright future.
DISCLAIMER: This is a work of research and should not be taken as investment or financial advice. Therefore, Select Sector SPDRs or the publisher is not liable for any decision made based on the publication.
About the Company:
Select Sector SPDR ETFs offer flexibility and customization opportunities. Many investors have similar outlooks, but no two are exactly alike. Select Sector SPDR ETFs let investors select the sectors that best meet their investment goals.
* Holdings, Weightings & Assets as of 8/31/23 subject to change
** Ordinary brokerage fees apply
The S&P 500 Index is an unmanaged index of 500 common stocks that is generally considered representative of the U.S. stock market. The index is heavily weighted toward stocks with large market capitalizations and represents approximately two-thirds of the total market value of all domestic common stocks. The S&P 500 Index figures do not reflect any fees, expenses or taxes. An investor should consider investment objectives, risks, fees and expenses before investing.
One may not invest directly in an index.
Transparent ETFs provide daily disclosure of portfolio holdings and weightings
All ETFs are subject to risk, including loss of principal. Sector ETF products are also subject to sector risk and nondiversification risk, which generally will result in greater price fluctuations than the overall market. Diversification does not eliminate risk.
An investor should consider investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus, which contains this and other information, call 1-866-SECTOR-ETF (732-8673) or visit www.sectorspdrs.com. Read the prospectus carefully before investing.
ALPS Portfolio Solutions Distributor, Inc., a registered broker-dealer, is distributor for the Select Sector SPDR Trust.
Company: Select Sector SPDRs
Contact: Dan Dolan*
Address: 1290 Broadway, Suite 1000, Denver, CO 80203
Country: United States
*Dan Dolan is a Registered Representative of ALPS Portfolio Solutions Distributor, Inc. ALPS Portfolio Solutions Distributor, Inc., a registered broker-dealer, is the distributor for the Select Sector SPDR Trust.
SEL006831 EXP 10/31/23
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Select Sector SPDR
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