During turbulent times, safe investments are the name of the game. Utilities have been a traditional defensive equity play and the sector has, again, held up quite well as the markets soured. Exchange traded funds that track utilities companies offer safe and stable returns with decent dividend yields.
Utilities Select Sector SPDR (NYSEArca: XLU) has an expense ratio of 0.18% and a 12-month yield of 3.87%. The fund is up 5.4% over the last three months and is 5.6% above its 200-day exponential moving average.
Vanguard Utilities Sector ETF (NYSEArca: VPU) has an expense ratio of 0.19% and a 12-month yield of 3.6%. VPU has gained 5.0% over the last three months and is 5.0% above its 200-day EMA.
iShares Dow Jones U.S. Utilities Index Fund ETF (NYSEArca: IDU) has an expense ratio of 0.47% and a 12-month yield of 3.37%. IDU increased 4.3% in the past three months and is 4.8% above its 200-day EMA.
In comparison, the SPDR S&P 500 (NYSEArca: SPY) has lost 1.6% over the last three months and is 0.4% above its 200-day EMA. The broad market ETF has been going back-and-forth over its 200-day support level for a few weeks now.
The utilities sector is a noncyclical, defensive play as consumers will require the electricity generated from utility facilities during any market condition. The current outperformance in utilities suggests that investors are scared and seek safety, which is not a good sign for the overall market. [Consumer Staples ETFs Play Defense Against Euro]
“Sustainable U.S. domiciled utilities and, for that matter, U. S. energy utilities as a whole, represent a good investment opportunity in these globally turbulent times,” Richard Rudden, chief executive and senior partner at Target Rock, said in a press release.