A List Of The Top Ten Utilities ETFs (XLU, VPU, JXI, FXU, RYU, IDU)

David Fry:  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.

We’re not ranking these ETFs favoring one over another so don’t let the listing order mislead you. Although we may use some of these in ETF Digest portfolios it’s not our intention to recommend one over another.

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.

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.

SPDR Utilities Sector ETF (NYSE:XLU) 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 billion and average daily trading volume is 6.3M shares. As of late July 2011 the annual dividend was $1.21 making the current yield 3.50% and YTD return 8.60%.

An alternative choice is ML Utilities HOLDRS (NYSE:UTH) which is structured as a trust with fixed holdings that are only altered as companies within the holdings are merged, spun-off or fail. Over time concentration issues arise which can prove positive or negative.

Data as of July 2011

XLU Top Ten Holdings & Weightings

  1. Southern Co (SO):  8.42%
  2. Exelon Corp (EXC):  6.97%
  3. Dominion Resources, Inc. (D):  6.82%
  4. NextEra Energy Inc (NEE):  5.95%
  5. Duke Energy Corporation (DUK):  5.68%
  6. FirstEnergy Corp (FE):  4.53%
  7. American Electric Power Co Inc (AEP):  4.48%
  8. PG & E Corporation (PCG):  4.13%
  9. Public Service Enterprise Group (PEG):  4.05%
  10. PPL Corp (PPL):  3.96%

Vanguard Utilities ETF (NYSE:VPU) 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 $787 million and average daily trading volume is 53K shares. As of late July 2011 the annual dividend was $2.40 making the current yield 3.40%.

Data as of July 2011

VPU Top Ten Holdings & Weightings

  1. The Southern Company (SO):  6.43%
  2. Exelon Corporation (EXC):  5.54%
  3. Dominion Resources, Inc. (D):  5.27%
  4. Duke Energy Corporation (DUK):  4.88%
  5. NextEra Energy, Inc. (NEE):  4.42%
  6. PG & E Corporation (PCG):  3.52%
  7. American Electric Power Co, Inc. (AEP):  3.43%
  8. Public Service Enterprise Group (PEG):  3.24%
  9. FirstEnergy Corp (FE):  3.15%
  10. Consolidated Edison, Inc. (ED):  2.99%

iShares DJ U.S. Utilities ETF (NYSE:IDU) 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 $540 million and average daily trading volume is 40K shares. As of late July 2011 the annual dividend was $2.95 making the current yield 3.50% and YTD return nearly 9%.

Data as of July 2011

IDU Top Ten Holdings & Weightings

  1. Southern Co (SO):  6.54%
  2. Exelon Corp (EXC):  5.46%
  3. Dominion Resources, Inc. (D):  5.41%
  4. Duke Energy Corporation (DUK):  4.79%
  5. NextEra Energy Inc (NEE):  4.67%
  6. FirstEnergy Corp (FE):  3.56%
  7. American Electric Power Co Inc (AEP):  3.47%
  8. Spectra Energy Corp (SE):  3.43%
  9. PG & E Corporation (PCG):  3.22%
  10. Public Service Enterprise Group (PEG):  3.20%

iShares Global Utilities ETF (NYSE:JXI) 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 $260 million and average daily trading volume is 35K shares. As of late July 2011 the annual dividend was $1.39 making the current yield 3.00% and YTD return of 2.00%.

Data as of July 2011

JXI Top Ten Holdings & Weightings

  1. E.ON Aktiengesellschaft (EOAN):  5.89%
  2. GDF Suez (GSZ):  5.45%
  3. Enel Societa Per Azioni (ENEL):  4.38%
  4. Iberdrola, S.A. (IBE):  4.09%
  5. National Grid PLC (NG.):  3.58%
  6. Southern Co (SO):  3.56%
  7. Exelon Corp (EXC):  2.94%
  8. Dominion Resources, Inc. (D):  2.88%
  9. Centrica PLC (CPYYF):  2.78%
  10. Duke Energy Corporation (DUK):  2.60%

PowerShares Dynamic Utilities ETF (NYSE: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 $143 million and average daily trading volume is 92K shares. As of late July 2011 the annual dividend was $.27 making the current yield 1.54% and YTD of 11.25%.

Data as of July 2011

PUI Top Ten Holdings & Weightings

  1. Sprint Nextel Corp (S):  3.13%
  2. Global Crossing, Ltd. (GLBC):  2.80%
  3. AT&T, Inc. (T):  2.59%
  4. Edison International (EIX):  2.52%
  5. Directv (DTV):  2.52%
  6. Time Warner Cable Inc A (TWC):  2.50%
  7. American Electric Power Co Inc (AEP):  2.50%
  8. Consolidated Edison, Inc. (ED):  2.47%
  9. Dominion Resources, Inc. (D):  2.44%
  10. Southern Co (SO):  2.43%

First Trust Utilities AlphaDEX ETF (NYSE:FXU) 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 $92 million with average daily trading volume of 50K shares. As of late July 2011 the annual dividend was $.42 making the current yield 2.30% and YTD of 10.77%.

Data as of July 2011

FXU Top Ten Holdings & Weightings

  1. NRG Energy Inc (NRG):  3.63%
  2. MetroPCS Communications, Inc. (PCS):  3.48%
  3. Edison International (EIX):  3.40%
  4. Public Service Enterprise Group (PEG):  3.36%
  5. Great Plains Energy, Inc. (GXP):  3.34%
  6. DTE Energy Holding Company (DTE):  3.33%
  7. CenturyLink Inc (CTL):  3.28%
  8. AT&T, Inc. (T):  3.26%
  9. Entergy Corp (ETR):  3.20%
  10. Telephone and Data Systems, Inc. (TDS):  3.06%

PowerShares SmallCap Utilities ETF (NYSE:PSCU) 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 late July 2011 the annual dividend was $.57 making the current yield 1.85% and YTD of 10.38%.

Data as of July 2011

PSCU Top Ten Holdings & Weightings

  1. Piedmont Natural Gas Company (PNY):  9.73%
  2. New Jersey Resources Corporation (NJR):  8.15%
  3. Southwest Gas Corporation (SWX):  7.63%
  4. South Jersey Industries (SJI):  7.14%
  5. UIL Holdings Corporation (UIL):  7.14%
  6. NorthWestern Corporation (NWE):  4.68%
  7. CH Energy Group Inc (CHG):  4.58%
  8. Avista Corporation (AVA):  4.57%
  9. El Paso Electric Company (EE):  4.51%
  10. UniSource Energy Corporation (UNS):  4.49%

WisdomTree Global ex-U.S. Utility ETF (NYSE: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 $33 million and average daily trading volume is 9K shares. As of late July 2011 the annual dividend was $.07 making the current yield .36% and YTD return of 3.75%.

Data as of July 2011

DBU Top Ten Holdings & Weightings

  1. Light S.A. (LIGT3):  3.25%
  2. AES Tiete S.A. (GETI3):  2.25%
  3. Rwe AG (RWE):  2.19%
  4. E.ON Aktiengesellschaft (EOAN):  1.99%
  5. Tohoku Electric Power Company, Inc. (9506):  1.92%
  6. Just Energy Group Inc (JE):  1.91%
  7. Drax Group PLC (DRX):  1.89%
  8. Energy Company of Minas Gerais (CMIG3):  1.87%
  9. EDP-Energias de Portugal SA (EDP):  1.74%
  10. AGL Energy Limited (AGK):  1.59%

Rydex Equal Weight Utilities ETF (NYSE: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 $27 million and average daily trading volume is 7K shares. (NOTE: The sponsor has suffered numerous ownership changes and marketing efforts have been hindered.) As of late July 2011 the annual dividend was $1.56 making the current yield 2.80% and YTD return 8.55%.

Data as of July 2011

RYU Top Ten Holdings & Weightings

  1. MetroPCS Communications, Inc. (PCS):  2.55%
  2. ONEOK, Inc. (OKE):  2.54%
  3. Sprint Nextel Corp (S):  2.53%
  4. NRG Energy Inc (NRG):  2.52%
  5. NiSource, Inc. (NI):  2.48%
  6. The AES Corp (AES):  2.48%
  7. Verizon Communications Inc (VZ):  2.48%
  8. American Tower Corporation A (AMT):  2.47%
  9. Public Service Enterprise Group (PEG):  2.47%
  10. Constellation Energy Group, Inc. (CEG):  2.47%

iShares Utilities ex-US ETF (NYSE: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 $2.57 million and average daily trading volume is only 1.4K shares. As of late July 2011 the annual dividend was $.55 making the current yield 1.05% and YTD return of 1%. With a fund this young but with a sponsor this big you would intuitively believe the fund will grow over time.

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

Data as of July 2011

AXUT Top Ten Holdings & Weightings

  1. E.ON Aktiengesellschaft (EOAN):  7.44%
  2. GDF Suez (GSZ):  6.76%
  3. Enel Societa Per Azioni (ENEL):  6.66%
  4. National Grid PLC (NG.):  5.17%
  5. Iberdrola, S.A. (IBE):  5.10%
  6. Centrica PLC (CPYYF):  3.79%
  7. Rwe AG (RWE):  3.61%
  8. Scottish and Southern Energy PLC (SSEZF):  3.06%
  9. CLP Holdings Limited (CLPHF):  2.71%
  10. Fortum Oyj (FOJCF):  2.12%

There are no effective charts to view at this time for AXUT.

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. This is their business interest apart from your investment interest. You should always ignore their interests and align your choices with what serves your objectives best.

Investors should note that in a rising market particularly ETFs linked to enhanced issues will tend to outperform conventional index linked issues. I’ve not done enough analysis to determine their relative performance during down market periods.

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.

For further information about portfolio structures using this or other ETFs see http://www.etfdigest.com/.

You may address any feedback to: [email protected] This e-mail address is being protected from spambots. You need JavaScript enabled to view it

(Source for holding data is from ETF Database and from various sponsors.)

Written By David Fry From ETF Digest 

David is founder and publisher of ETF Digest and best selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management published by Wiley Finance in 2008.  In July of 2009, Fry was named in the ETF Hall of Fame as one of the Top 25 people who revolutionized the ETF industry and guided ETF investing from its conception to widespread acceptance among all breeds of investors. Fry founded the ETF Digest in 2001 and was among the very first to see the need for an online publication that provided individual investors and financial professionals with trading tools, market information and actionable advice on ETF investing.  ETF Digest was recently ranked 9th in the Top 100 ETF websites from Alexa on exchange traded funds. Dave Fry has devoted over 35 years to the business of trading and portfolio management. He is registered as an arbitrator with the Financial Industry Regulatory Authority (FINRA) and the National Futures Association (NFA).

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