Utilities ETFs are outperforming the S&P 500 by a wide margin since the beginning of May on Eurozone worries and as investors move away from riskier sectors and favor defensive ETFs.
For example, Utilities Select Sector SPDR (NYSEArca: XLU) is known for its low volatility. The consistent distributions paid to investors is another plus in a down market. XLU has a dividend yield of 3.76%, according to manager State Street Global Advisors.
The ETF XLU has returned 0.6% year-to-date, compared to the broad market S&P 500 at – 6% year-to-date. The utility sector was the one major sector to end the month of May in positive territory, reports Daniel Putnam for InvestorPlace. The fund includes companies from the following industries: electric utilities; multi-utilities; independent power producers & energy traders; and gas utilities. [Utilities ETFs for Dividends, Stability]
This ETF is well-suited to be a core holding in a portfolio, but has also proved merit in a sector rotation strategy. There are often big differences between performance of various sectors of the economy.