XLU ETF

One of the top-performing sectors YTD has been financials, with the popular financial ETF, Financial Select Sector SPDR NYSEARCA: XLF, already up 6.5% as of Friday's close. Conversely, one of the sectors that outperformed for the first three quarters of last year, utilities, represented by the Utilities Select Sector SPDR ETF NYSEARCA: XLU, has lagged financials and performed in line with the benchmark S&P 500.

Today we provide a quick update on three key components to Dow Theory, looking at the performance of the Dow Jones Industrial Average, Dow Jones Transportation Average and the Utilities Sector ETF (XLU). More specifically, we look at performance over the past 27-months.

The Utilities sector shows promise with AI-driven demand and potential deregulation, but high long-term yields pose challenges for debt refinancing and new projects. XLU ETF offers simple, low-cost exposure to 34 S&P500 utility stocks, with a 0.09% expense ratio and a 2.97% dividend yield. Despite average performance and concentration, XLU is a solid choice for utility exposure.

Looking for broad exposure to the Utilities - Broad segment of the equity market? You should consider the Utilities Select Sector SPDR ETF (XLU), a passively managed exchange traded fund launched on 12/16/1998.

The utilities sector has outperformed in 2024, with XLU up 22% since Q3; I rate XLU a buy due to its stability and fair valuation. XLU benefits from potential interest rate cuts and economic downturns, thriving in defensive sectors, and AI advancements boosting electric utility demand. XLU's top holdings include NextEra Energy, Southern, and Duke Energy, with a strong dividend yield and 13 years of growth, making it a reliable investment.

Despite strong gains this year, the XLU ETF still offers a 2.65% yield and is still trading at a significant discount to the S&P 500. The long-term outlook for electric power generators is favorable due to the transition to cleaner energy sources, EVs, and increasing AI data center demand. Top holdings like NextEra Energy and Sempra provide strong growth potential and dividends, making XLU a solid addition to a diversified portfolio.

The market had a great year and might continue to do well, as positive feelings are supported by recent strong performance and past patterns.

Traditional wisdom considers utility stocks safe haven investments for good reason. They offer a combination of growth and quasi-bond features (such as generous yields and relative predictable earnings). However, now is a bad time to apply such wisdom, especially when applied blindly.

Utilities are essential investments due to their critical role in daily life, similar to Warren Buffett's top-tier businesses like Coca-Cola and American Express. XLU offers cost-effective, diversified exposure to the utilities sector, with a focus on stable, dividend-paying companies. Increasing energy demand from data centers and electric vehicles, along with AI advancements, positions utilities for significant growth, with nuclear energy emerging as a key solution.