This Utility Focused ETF Gives Investors a Great Yield

A great way for investors to collect a safe dividend is to load up on top utility stocks. These companies generate recurring, consistent revenue, and often pay a lot in dividends. And an exchange-traded fund (ETF) can easily give investors exposure to multiple utility stocks.

The Fidelity MSCI Utilities Index ETF (NYSE Arca:FUTY) holds close to 70 stocks and it’s an excellent option for investors who seek utility stocks. It is a passively managed fund and so its fees are low – it has an expense ratio of just 0.084%. The average stock in the fund trades at 17 times earnings and a price-to-book multiple of around 1.9.

The vast majority of the fund’s exposure is to electric utility stocks, which account for 62% of its holdings, followed by multi-utility stocks, which make up 25% of the fund. The top three stocks in the ETF are NextEra Energy (NYSE:NEE), Southern Company (NYSE:SO), and Duke Energy (NYSE:DUK). Together, they account for 26% of the fund’s weight. And the top 10 holdings make up 53% of the ETF.

The fund has a yield of 3.3%, which is above average (the typical stock in the S&P 500 yields 1.4%). Year to date, the Fidelity MSCI Utilities ETF has risen by less than 5% and when including the dividend, its total returns come in at 6.6%. Over the past decade, the fund’s value has risen by 53% and its total returns are 114%. By comparison, the S&P 500’s total returns are 226% over that same period.

While you would be sacrificing some gains in exchange for safety, this ETF can be a more appropriate investment option for risk-averse investors.