Second, valuations are viewed as frothy for slow-growing utilities. The S&P 500 Utilities Index had a P/E ratio of 15.9 at the end of April compared to 14.1 for the benchmark index itself, according to WisdomTree data.
XLU currently has a P/E of almost 16, indicating that investors will not only be paying up to grab yield and play some defense, but they will also be paying a premium for a sector ETF that has recently turned to laggard from leader.
As just one example of a sector ETF that underscores the returns/valuation conundrum now being offered by the likes of VPU and XLU, the Energy Select Sector SPDR (NYSEARca: XLE), a higher beta ETF to be sure, has a P/E of just 13.2 and has jumped 4.8% in the past month.
ETF Trends editorial team contributed to this piece.