Fidelity MSCI Utilities Index ETF: This Fund Is A Good One To Own In This Time Of Uncertainty

Summary

• FUTY owns a portfolio of stocks that consists of mostly large-cap utility stocks in the U.S.
• Stocks in FUTY's portfolio are recession resilient stocks that generate stable and predictable cash flows.
• Growth is likely to be modest for stocks in FUTY portfolio.
• The fund pays a growing 3.4%-yielding dividend.

ETF Overview

Fidelity MSCI Utilities Index ETF (NYSEARCA:FUTY) owns a portfolio of U.S. utility stocks. The fund seeks to track the investment results of the MSCI USA IMI Utilities Index. Stocks in FUTY's portfolio are considered defensive stocks as they tend to generate stable and predictable cash flows. In fact, stocks in FUTY's portfolio have consistently increased their dividends in the past. Given the uncertain macro environment caused by the outbreak of COVID-19, we think FUTY is a good investment choice as its stocks are mostly recession resilient stocks.

Data by YCharts

Fund Analysis

Utility stocks are moaty stocks by nature

FUTY's portfolio consists of 65 stocks and its top-10 holdings represent about 55% of the total portfolio. A large portion of these stocks' revenue is derived from its regulated utilities. In other words, these stocks are stocks with limited competitions. Since majority of these companies' revenues are derived from businesses that provide essential services (e.g. electricity transmission and generation, natural gas delivery, etc.), they generate stable and predictable cash flows. Therefore, it is not surprising that most of these stocks receive moaty status according to Morningstar's research.

	Morningstar Moat Status	Financial Health Rating	% of ETF
NextEra Energy (NEE)	Narrow	Moderate	12.70%
Dominion Energy (D)	Wide	Moderate	6.85%
Duke Energy (DUK)	Narrow	Moderate	6.77%
Southern Co. (SO)	Narrow	Moderate	6.50%
American Electric Power (AEP)	Narrow	Moderate	4.47%
Exelon Corp. (EXC)	Narrow	Moderate	4.15%
Sempra Energy (SRE)	Narrow	Moderate	3.97%
Xcel Energy (XEL)	Narrow	Moderate	3.60%
WEC Energy Group (WEC)	Narrow	Moderate	3.15%
Consolidated Edison (ED)	None	Moderate	2.91%
Total:			55.07%

Click to enlarge

Source: Created by author

Slow growth expected in the next few decades

Utility sectors include many subsectors such as electric utilities, gas utilities, independent power producers, multi-utilities, etc. As can be seen from the chart below, about 58% of FUTY's portfolio consists

Analyst’s Disclosure:I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This is not financial advice and that all financial investments carry risks. Investors are expected to seek financial advice from professionals before making any investment.