Energy exchange traded funds did not need the assistance, but plenty have been rallying this week on news of insurgent attacks in Iraq. That despite the fact that the attacks have not moved to Southern Iraq where the bulk of the country’s oil output comes from.
At this writing Friday, just 17 ETFs have hit new 52-week highs, seven of which are energy funds. That is similar to what was seen on Thursday when about half of the 46 ETFs to hit new 52-week highs were energy plays, affirming the group’s status as far away the top-performing sector in the second quarter. [More Upside for Energy ETFs]
Geopolitical tensions in Iraq have provided a predictable bounce for an array of equity-based energy ETFs, including familiar names such as the Energy Select Sector SPDR (NYSEArca: XLE), the Vanguard Energy ETF (NYSEArca: VDE) and the iShares U.S. Energy ETF (NYSEArca: IYE), but investors should not be hasty in overlooking the international equivalents of those ETFs. [Global Oil ETFs Winning]
The iShares Global Energy ETF (NYSEArca: IXC) hit a new 52-week high earlier Friday while the SPDR S&P International Energy Sector ETF (NYSEArca: IPW) did the same. Up 1.3%, the often overlooked IPW is one of the top-performing equity-based energy ETFs today.
As far as ETF ideas with leveraged to tensions in Iraq, IPW and IXC make a lot of sense. Take the example of IPW, which has $20 million in assets, making it the smaller of the two international energy ETFs. Unlike, IXC, which mixes U.S. and mainly other developed market oil majors, IPW focuses almost exclusively on non-U.S. companies.
BP (NYSE: BP) “has a 38% working interest in the Rumaila field in southern Iraq. Rumaila is one of the five largest oil fields in the world and holds proved reserves of nearly 18 billion barrels,” reports Paul Ausick for 24/7 Wall Street. Although Rumaila represents a small part of BP’s overall output, the British oil giant got 39,000 barrels per day of production there last year, according to 24/7 Wall Street.
BP rival Royal Dutch Shell (NYSE: RDS-A) has a 45% stake Iraq’s Majnoon field, which produces over 200,000 barrels per day. BP and two Shell securities combine for 27% of IPW’s weight. France’s Total (NYSE: TOT), which has a checkered history in Iraq, still maintains a presence there. The stock is IPW’s largest individual holding with a weight of 10.6%.
Beyond Iraq, IPW and IXC offer another advantage to investors, that being European oil majors typically feature greater dividend yields than their U.S. counterparts.
The average dividend yield for BP, Shell, Total and Italy’s Eni (NYSE: E) is 4.7% compared to an average yield of 3.1% for Exxon Mobil (NYSE: XOM), Chevron (NYSE: CVX), ConocoPhillips (NYSE: COP) and Occidental Petroleum (NYSE: OXY). Those U.S.-based companies combine for over a third of XLE’s weight.
XLE’s dividend yield is 1.64% compared to 2.29% for IXC. Confirming what a difference excluding U.S. stocks makes, IPW’s trailing 12-month yield is 2.84%. [Stick With Energy ETFs]
SPDR S&P International Energy Sector ETF