Finding The Most Powerful ETF

| About: Utilities Select (XLU)
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A quick look at the ETF new high list for July 17, 2012 makes it clear that even during this uncertain period for stocks, the one sector that continues to work is Utilities.

Several of the ETFs on the new high list focus on the major power companies. Of the ETFs listed, the Select Sector SPDR -Utilities (NYSEARCA:XLU) is by far the most traded, with an average volume of nearly six million shares per day.

The top 10 holdings as of June 29, 2012 comprise 55.7% of this ETF (from Yahoo! Finance), and they are big names in electric or gas power:

  • Southern Company, The (NYSE:SO)
  • Exelon Corporation (NYSE:EXC)
  • Dominion Resources, Inc. (NYSE:D)
  • Next Era Energy, Inc. (NYSE:NEE)
  • Duke Energy Corporation (NYSE:DUK)
  • First Energy Corporation (NYSE:FE)
  • American Electric Power Company (NYSE:AEP)
  • Pacific Gas & Electric Co. (NYSE:PCG)
  • Consolidated Edison, Inc. (NYSE:ED)
  • Progress Energy, Inc.

Included in the top 10 as of this date are both Duke Energy and Progress Energy. Duke and Progress are completed a merger on July 2, 2012.making the combined company the largest utility in the US. Although the Progress stock price increased over the last six months as the deal was completed, Duke's also gained in that period, helping to push up the performance of this ETF. Duke's price has suffered a bit since the merger due to concerns over a management shake-up.

In addition to price appreciation of 4.73% year to date, the ETF is paying an annual dividend of 3.78%. That may not strike you as a huge return, but it has been a consistent performer. It sports a 0.3 beta compared to a 1.0 for the SPY.

What's Next for the XLU

In the turbulent times we are in, utilities are consistent and lower risk investments. The above average yield and little to no overseas exposure should make these stocks popular at least for the rest of the year. The tailwind of the Progress - Duke merger is behind them, but the stocks seem able to generate enough income to continue to attract investors.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.