Select Sector Utilities SPDR
Quantitative easing essentially is a way to get investors to move money away from bonds to riskier assets, which should help make it cheaper for companies to borrow money and grow. But the shift in appetite is likely to be subtle — investors probably will move into assets that have only modestly higher risk profiles.
A good example of this is utilities, which traditionally are as steady as stocks get. They usually have strong cash flows and (most importantly) hefty dividend yields.
A top ETF is the Utilities Select Sector SPDR (NYSE:XLU) fund, which has more than $6 billion in assets. It tracks the 32 utilities in the S&P 500 Index, including names like Duke Energy (NYSE:DUK), Exelon (NYSE:EXC) and Dominion Resources (NYSE:D).
XLU has a rock-bottom expense ratio of 0.18%, which means more money gets back into investors’ pockets — and you’ll want as much as XLU’s 3.8% in dividends as you can get.
However, like utility stocks, you’re not looking for breakneck growth from XLU. The fund is meeting expectations there, essentially flat year-to-date amid profit-taking and slow revenue growth on the back of a sluggish U.S. economy. Still, the XLU has seen 10% annual returns the past 10 years — but really, even if the XLU stays flat, it’ll serve its purpose as a solid income play.