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Should You Invest in the Vanguard Utilities ETF (VPU)?

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Looking for broad exposure to the Utilities - Broad segment of the equity market? You should consider the Vanguard Utilities ETF (VPU - Free Report) , a passively managed exchange traded fund launched on 01/26/2004.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Sector ETFs also provide investors access to a broad group of companies in particular sectors that offer low risk and diversified exposure. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 10, placing it in bottom 38%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $6.38 billion, making it one of the largest ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. VPU seeks to match the performance of the MSCI US Investable Market Utilities 25/50 Index before fees and expenses.

The MSCI US Investable Market Utilities 25/50 Index comprises of stocks of large, mid-size, and small U.S. companies within the utilities sector.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 3.01%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Utilities sector--about 99.90% of the portfolio.

Looking at individual holdings, Nextera Energy Inc (NEE - Free Report) accounts for about 12.79% of total assets, followed by Southern Co/the (SO - Free Report) and Duke Energy Corp (DUK - Free Report) .

The top 10 holdings account for about 53.09% of total assets under management.

Performance and Risk

The ETF has added roughly 22.94% and was up about 25.02% so far this year and in the past one year (as of 12/23/2024), respectively. VPU has traded between $129.56 and $179.11 during this last 52-week period.

The ETF has a beta of 0.61 and standard deviation of 17.86% for the trailing three-year period, making it a medium risk choice in the space. With about 68 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Utilities ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, VPU is an outstanding option for investors seeking exposure to the Utilities/Infrastructure ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Fidelity MSCI Utilities Index ETF (FUTY - Free Report) tracks MSCI USA IMI Utilities Index and the Utilities Select Sector SPDR ETF (XLU - Free Report) tracks Utilities Select Sector Index. Fidelity MSCI Utilities Index ETF has $1.65 billion in assets, Utilities Select Sector SPDR ETF has $16.71 billion. FUTY has an expense ratio of 0.08% and XLU charges 0.09%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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