The SPDR Utilities (XLU) sector is an energy infrastructure sector. Companies in the defensive sector serve the power demand of individuals, firms, and governments. XLU companies generate and transmit electricity and natural gas, comprising only about 3% of the S&P 500.1
The ETF includes 28 stocks in electric utilities (65%), multi-utilities (29%), water utilities (3%), independent power and renewable electricity producers (2%), and gas utilities (2%).2 XLU is capital-intensive and has a large, stable customer base. Its performance depends in part on crude oil prices, construction spending, and favorable government regulations.
In the competitive landscape within XLU, electricity and gas companies compete with alternative sources of energy, such as solar, wind, and hydro. The high incentive to compete is largely driven by public opinion, reliability of the energy sources, and tax breaks for renewable energy.
First State’s sector weightings rank the Utilities as outperforming the market and #5 out of 11 for safety. First State Investment Advisors maintains a significant position in American Electric Power (AEP) for its client portfolios. Investors in the S&P 500 who want greater exposure to XLU can add the ETF to their First State portfolios.
Our wealth management team is adept at designing portfolios customized to client needs. For a free consultation with professional wealth advisors in Tulsa, contact First State Investment Advisors at (918) 492-1361.
Sources
1Select Sector SPDRs (Accessed Feb 1, 2023)
2State Street Global Advisors XLU The Utilities Select Sector SPDR® Fund (Accessed Feb 1, 2023)
This overview is for informational purposes only and is not a recommendation. It should not be the sole deciding factor in making an investment. Investing is a risk and, as with all risks, a positive return is not guaranteed. Past performance does not indicate future results.