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XLU, VPU, and PAVE are the best utilities ETFs for 2022.
Best Utilities ETFs: Overview
Here are the best utilities ETFs:
- Utilities Select Sector SPDR Fund (XLU)
- Vanguard Utilities ETF (VPU)
- Global X US Infrastructure Development ETF (PAVE)
XLU and VPU are your more classical options, while PAVE provides non-traditional exposure in the sense that it is not exclusive to the utility sector alone.
Our analysis below will help you determine which one of these is best for your portfolio.
Best Utilities ETFs
#1. Utilities Select Sector SPDR Fund (XLU)
- 1-Year Performance: +6.71%
- Expense Ratio: 0.12%
- Annual Dividend Yield: 2.96%
- AUM: $13.11 billion
- 3 Month Avg. Volume: 16,490,246
- Number of Holdings: 30
- Inception Date: 1998
The Utilities Select Sector SPDR Fund ETF provides narrow exposure to the utilities sector of the S&P 500 Index.
Generally speaking, the 30 holdings in XLU are legacy companies sitting at the top of their industry.
XLU is for you if you’re seeking large-caputility exposure to the established names in the space – and if you’re okay with higher levels of concentration.
This is a low-cost fund with a nice dividend yield and plenty of liquidity. Hats off to State Street.
XLU Top Holdings:
- NextEra Energy (NEE) 15.84%
- Duke Energy (DUK) 8.21%
- Southern Company (SO) 7.41%
- Dominion Energy (D) 6.81%
- American Electric Power Company (AEP) 4.63%
#2. Vanguard Utilities ETF (VPU)
- 1-Year Performance: +6.25%
- Expense Ratio: 0.10%
- Annual Dividend Yield: 3.07%
- AUM: $5.36 billion
- 3 Month Avg. Volume: 266,995
- Number of Holdings: 66
- Inception Date: 2004
The Vanguard Utilities ETF provides broad-cap U.S. equity exposure to the entire utilities sector.
The 66 companies in VPU are primarily in the Electric Utilities and Multi-Utilities sub-industries, which account for 61% and 26% of the fund, respectively. This is nearly identical to their weightings in XLU too.
But unlike XLU, there are companies of all sizes in VPU. Granted, the majority of them are still of the large-cap type.
VPU is slightly more cost-effective and has a slightly higher dividend yield than XLU.
However, these are marginal differences and probably shouldn’t be your line of demarcation if you’re choosing between these two funds.
We believe it should be a question of diversification.
XLU appears to be the better option if you’re only interested in the market leaders, and VPU appears to be the better option if you’re interested in the market leaders but also want more diversification.
VPU Top Holdings:
- NextEra Energy (NEE) 13.56%
- Duke Energy (DUK) 7.15%
- Southern Company (SO) 6.51%
- Dominion Energy (D) 5.77%
- Exelon Corporation (EXC) 5.01%
#3. Global X US Infrastructure Development ETF (PAVE)
- 1-Year Performance: +19.64%
- Expense Ratio: 0.47%
- Annual Dividend Yield: 0.33%
- AUM: $5.05 billion
- 3 Month Avg. Volume: 1,603,553
- Number of Holdings: 104
- Inception Date: 2017
The Global X U.S. Infrastructure Development ETF invests in companies that “stand to benefit from a potential increase in infrastructure activity in the United States, including those involved in the production of raw materials, heavy equipment, engineering, and construction.”
This is not your traditional “Utilities ETF” – it’s a little more ambitious than XLU and VPU.
In fact, PAVE’s sector breakdown shows just a 2.73% allocation to the “Utilities” sector.
However, the top companies in PAVE create electrical products, industrial machinery, and various engineering components vital to the utilities sector.
Hence, the word “Infrastructure” is in the name.
Global X is known for its “Unconstrained Approach” to ETF construction. In the case of PAVE, it prioritizes investing in the broader infrastructure theme and is agnostic to any sector or industry.
PAVE Top Holdings:
- Nucor Corporation (NUE) 3.82%
- Deere & Company (DE) 3.15%
- Emerson Electric (EMR) 2.98%
- Vulcan Materials Company (VMC) 2.97%\
- CSX Corporation (CSX) 2.96%
Alternatives to the Best Utilities ETFs
Here are some alternatives to the three utilities ETF from above:
- iShares Global Infrastructure ETF (IGF)
- iShares U.S. Utilities ETF (IDU)
- iShares Global Utilities ETF (JXI)
- FlexShares STOXX Global Broad Infrastructure Index Fund (NFRA)
- Invesco S&P 500 Equal Weight Utilities ETF (RYU)
The differences between the iShares funds are self-evident by name, and each offers a marginally different type of exposure to utilities.
The RYU fund has the same holdings as the Utilities Select Sector SPDR Fund (XLU) but instead allocates to each holding equally.
Best Utilities ETFs: FAQs
What is the best utility ETF?
The best utility ETFs are the Utilities Select Sector SPDR Fund (XLU), the Vanguard Utilities ETF (VPU), and the Global X US Infrastructure Development ETF (PAVE).
Are utility ETFs a good investment?
Utility ETFs are a good investment because people will always want water, electricity, and various forms of energy. Utilities tend to perform well during market corrections as investors turn to cash-producing equities.
Does Vanguard have a utilities ETF?
Vanguard has one of the most popular utilities ETFs on the market, the Vanguard Utilities ETF (VPU). It has a low expense ratio, pays out a 3.07% dividend yield, and has $5 billion in assets.
Bottom Line: Best Utilities ETFs
These ETFs provide adequate exposure to the utilities sector, but each optimizes for a different variable.
We imagine that one of them will satisfy your search.
This article is for informational purposes only, and it is not intended to be investment advice. Read our editorial guidelines and public equities research methodology to learn more about how we selected the best Utilities ETFs.
