Utilities exchange traded funds led the way among U.S. sector ETFs in 2011 as investors flocked to dividend-paying stocks and more conservative industries that tend to be less volatile than the overall market.

Among S&P 500 sectors, utilities were the top-performing slice of the index with a 14.5% price return, or a gain of 19.4% when dividends are included, according to Sam Stovall, chief equity strategist at S&P Capital IQ. [ETF Focus: Dividend Funds in 2012]

Utilities were followed by consumer staples and healthcare, which rose 14.4% and 13.2%, respectively, when dividends are factored in.

Utilities Select Sector SPDR (NYSEArca: XLU) is up 17.7% year to date. [Utilities, Consumer and Pharma ETFs Lead 2011]

“Investors holding XLU have historically received generous dividends quarterly, and the fund has generally moved in the same direction as the overall market, albeit with smaller gains and retreats,” Morningstar analyst Abraham Bailin wrote in a profile of the utilities ETF.

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