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Is Invesco S&P 500 Equal Weight Utilities ETF (RYU) a Strong ETF Right Now?

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The Invesco S&P 500 Equal Weight Utilities ETF (RYU) made its debut on 11/01/2006, and is a smart beta exchange traded fund that provides broad exposure to the Utilities/Infrastructure ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

Because the fund has amassed over $236.42 million, this makes it one of the average sized ETFs in the Utilities/Infrastructure ETFs. RYU is managed by Invesco. RYU seeks to match the performance of the S&P 500 Equal Weight Telecommunication Services & Utilities Index before fees and expenses.

This index is an unmanaged equal weighted version of the S&P 500 Utilities Index that consists of common stocks of the following industries: electric utilities, gas utilities, multi-utilities & unregulated power & water utilities,telecommunication service companies, including fixed-line, cellular, wireless, high bandwidth & fiber-optic cable networks.

Cost & Other Expenses

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 RYU are 0.40%, which makes it one of the cheaper products in the space.

RYU's 12-month trailing dividend yield is 2.66%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Utilities sector - about 100% of the portfolio.

Looking at individual holdings, Nrg Energy Inc (NRG) accounts for about 4.03% of total assets, followed by Nextera Energy Inc (NEE) and American Electric Power Co Inc (AEP).

Its top 10 holdings account for approximately 36.79% of RYU's total assets under management.

Performance and Risk

The ETF has added roughly 9.61% so far this year and was up about 17.18% in the last one year (as of 09/23/2021). In the past 52-week period, it has traded between $91.65 and $112.58.

The ETF has a beta of 0.40 and standard deviation of 25.21% for the trailing three-year period, making it a medium risk choice in the space. With about 29 holdings, it has more concentrated exposure than peers.

Alternatives

Invesco S&P 500 Equal Weight Utilities ETF is a reasonable option for investors seeking to outperform the Utilities/Infrastructure ETFs segment of the market. However, there are other ETFs in the space which investors could consider.

Vanguard Utilities ETF (VPU) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $4.93 billion in assets, Utilities Select Sector SPDR ETF has $12.82 billion. VPU has an expense ratio of 0.10% and XLU charges 0.12%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Utilities/Infrastructure ETFs.

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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Invesco S&P 500 Equal Weight Utilities ETF (RYU): ETF Research Reports
 
NextEra Energy, Inc. (NEE) : Free Stock Analysis Report
 
NRG Energy, Inc. (NRG) : Free Stock Analysis Report
 
American Electric Power Company, Inc. (AEP) : Free Stock Analysis Report
 
Utilities Select Sector SPDR ETF (XLU): ETF Research Reports
 
Vanguard Utilities ETF (VPU): ETF Research Reports
 
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