In rating equity ETFs, CFRA combines holdings-level analysis with fund attributes, including expense ratio and trading costs. A low-cost ETF with a collection of stocks CFRA views favorably from a valuation and risk perspective is more likely to earn a top Overweight rating.
Though the utilities sector remains small, at 3% of the S&P 500 index, some low volatility and dividend ETFs have hefty weightings in the sector. Invesco S&P 500 Low Volatility ETF (SPLV 96 Overweight), which holds the least volatile stocks in the broader S&P 500 index, has a 24% weighting in the utilities sector. SPLV has a 0.25% net expense ratio.
The utilities sector offers above-average dividend yields making utilities stocks appropriate in high-dividend focused ETFs such as iShares Select Dividend ETF (DVY 96 Overweight). Utilities is the largest sector here as well, at 31% ofassets, with PPL Corp and Entergy among them.
Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.