News

Designed to provide broad exposure to the Utilities - Broad segment of the equity market, the Vanguard Utilities ETF (VPU) is a passively managed exchange traded fund launched on 01/26/2004.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 9, placing it in bottom 38%.

Index Details

The fund is sponsored by Vanguard. It has amassed assets over $5.51 billion, making it one of the largest ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. VPU seeks to match the performance of the MSCI US Investable Market Utilities 25/50 Index before fees and expenses.

The MSCI US Investable Market Utilities 25/50 Index comprises of stocks of large, mid-size, and small U.S. companies within the utilities sector.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 3.12%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Utilities sector--about 99.80% of the portfolio.

Looking at individual holdings, Nextera Energy Inc (NEE) accounts for about 11.06% of total assets, followed by Southern Co/the (SO) and Duke Energy Corp (DUK).

The top 10 holdings account for about 52.54% of total assets under management.

Performance and Risk

The ETF return is roughly 11.32% so far this year and was up about 8.50% in the last one year (as of 06/17/2024). In that past 52-week period, it has traded between $121.65 and $157.94.

The ETF has a beta of 0.59 and standard deviation of 17.82% for the trailing three-year period, making it a medium risk choice in the space. With about 67 holdings, it effectively diversifies company-specific risk.

Alternatives

Vanguard Utilities ETF carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, VPU is a sufficient option for those seeking exposure to the Utilities/Infrastructure ETFs area of the market. Investors might also want to consider some other ETF options in the space.

IShares U.S. Utilities ETF (IDU) tracks Dow Jones U.S. Utilities Index and the Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. IShares U.S. Utilities ETF has $1.30 billion in assets, Utilities Select Sector SPDR ETF has $14.13 billion. IDU has an expense ratio of 0.40% and XLU charges 0.09%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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Vanguard Utilities ETF (VPU): ETF Research Reports

NextEra Energy, Inc. (NEE) : Free Stock Analysis Report

Southern Company (The) (SO) : Free Stock Analysis Report

Duke Energy Corporation (DUK) : Free Stock Analysis Report

Utilities Select Sector SPDR ETF (XLU): ETF Research Reports

iShares U.S. Utilities ETF (IDU): ETF Research Reports

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.