For This ETF, Big Utilities Weight Means Big Returns

ETF Trends

The Utilities Select Sector SPDR (XLU) is higher by 16.8% while the second-best of the nine sector SPDR ETFs, the Energy Select Sector SPDR (XLE) , is up just 7.6%.

That is to say the utilities sector, the second-smallest sector weight in the S&P 500, has been by far the best performer in the benchmark U.S. index this year. Leadership courtesy of utilities stocks has burnished not only sector ETFs such as XLU, but an assortment of dividend ETFs with substantial allocations to the sector as well. [Other ETFs Benefiting From Utilities Strength]

Put the RevenueShares Ultra Dividend Fund (RDIV) on that list. One comparison that is useful when evaluating RDIV is the following. With a utilities allocation of 35.3% and a trailing 12-month yield of just over 3%, the iShares Select Dividend ETF (DVY) , one of the largest U.S. dividend ETFs, is higher by almost 7% this year. [Utilities ETFs Flex Their Muscles]

RDIV has a 44.4% weight to utilities, more than two and a half times the allocation the ETF bestows to its second-largest sector weight, telecom. That massive utilities exposure gives RDIV a dividend yield of 3.5% and has helped the ETF jump 9% this year.

Like the other RevenueShares ETFs, including the RevenueShares Large Cap Fund (RWL) and the RevenueShares Financials Sector Fund (RWW) , RDIV’s holdings are weighed by revenue.

RDIV is comprised of 60 stocks from the S&P 900, ranked by the average 12 month trailing dividend yield in each of the previous trailing four quarters, according to RevenueShares.

As of April 24, RDIV was the top-performing U.S. large-cap ETF, according to Morningstar data.

Although RDIV is just seven months old, the ETF offers a credible option for long-term, dividend growth investors. As of the end of the first quarter, seven of RDIV’s top-10 holdings had dividend increase streaks of at least five years. On that same date, 38 of the ETF’s 60 constituents had dividend increase streaks of at least five years, according to RevenueShares data.

RDIV has a P/E ratio of 14.58 and a price-to-sales ratio of 1.2. The ETF’s annual expense ratio is 0.49%.

RDIV Top-10 Holdings

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Table Courtesy: RevenueShares

Tom Lydon’s clients own shares of DVY.

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