Declining 10-year Treasury yields and the significant retrenchment in momentum stocks have been boons for the utilities sector this year.
The Utilities Select Sector SPDR (XLU) is by far the best performer of the nine sector SPDR ETFs. Up 11.8% year-to-date, XLU is crushing the second-best of the SPDRs, the Health Care Select Sector SPDR (XL.V) . The Vanguard Utilities ETF (VPU) and the iShares U.S. Utilities ETF (IDU) are also up more than 11%. [Utilities ETFs Assert Strength]
But it is more than just XLU and friends that are benefiting from the leadership of the utilities sector. Select dividend and low volatility ETFs are also getting a lift thanks to robust utilities sector exposure.
Take the example of the PowerShares S&P 500 Low Volatility Portfolio (SPLV) . Arguably in stealth fashion, the $3.8 billion SPLV hit an all-time high last Friday and is up about 3.7% year-to-date compared to a 2.1% gain for its biggest competitor, the iShares MSCI USA Minimum Volatility ETF (USMV) . The difference maker is SPLV’s 24.5% weight to utilities stocks, more than triple that of USMV’s to the sector. [Low Vol ETFs Come Back Into Style]
That is not an affront to iShares because the sponsor offers two U.S.-focused dividend ETFs that have benefited from ample utilities exposure. Of the four largest dividend ETFs, the iShares Select Dividend ETF (DVY) is easily the best performer this year with a 5% gain. That is proof positive that with Treasury yields ebbing, DVY’s 35.2% weight to the utilities sector is working in favor of investors.
It were large enough to be among the top-four dividend ETFs, the iShares High Dividend ETF (HDV) would be second-best on a year-to-date basis with a 3.6% gain. HDV, though not small with $3.4 billion in assets, is not in the top four, but it does feature a 14.4% weight to utilities. HDV has attracted more than $108 million in new assets this year and has a trailing 12-month yield of 3.2%. [Income Investors Rush to This Dividend ETF]
Investors looking to access the utilities sector via a dividend ETF can also consider the First Trust Morningstar Dividend Leaders Index Fund (FDL) . FDL tracks the Morningstar Dividend Leaders Index, which emphasizes dividend consistency and dividend sustainability as part of its screening methodology.