The Utilities Select Sector SPDR Fund (XLU) provides exposure to the utility sector in the United States. The fund uses a replication strategy to track the performance of the Utilities Select Sector Index.
Securities from companies in the gas utilities, water utilities, independent power producers, multi-utilities, and utilities for the production of renewable and independent power are included in the index. The five-year monthly beta for XLU is 0.54, reflecting its lower volatility compared to the broader market.
In a recessionary environment, the utility sector provides a solid hedge to one’s investment portfolio. In addition, this highly regulated sector is known for its low volatility in terms of financials.
Here are the factors that could affect XLU’s performance in the near term:
XLU has $18.13 billion in assets under management and a NAV of $76.66. Its gross expense ratio of 0.10% is significantly lower than the category average of 0.43%. The fund has a net flow of $3.12 billion over the past year and $804.54 million over the past month.
The fund’s top holdings include NextEra Energy Inc. (NEE) with a 17.2% weight, Duke Energy Corp. (DUK) with an 8.4% weight, Southern Co (SO) with a 7.3% weight, Dominion Energy Inc. (D) with a 6.6% weight, and the Exelon Corp (EXC) with a 5% weight.
XLU’s annual dividend of $1.98 yields 2.96% on prevailing prices. Its dividend payouts have increased at a 3.6% CAGR over the past five years. The fund has a record of…
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