Utilities SPDR (ETF) (XLU) — This fund, which tracks the price and yield performance of the Utilities Select Sector Index, before expenses, appears to be in a buying zone for both short-term and long-term investors.
XLU has received favorable rankings from several firms. For instance, it is ranked “four stars” by Morningstar (out of five), while S&P Capital IQ rates the fund “overweight.”
The ETF has a low expense ratio of 0.14% and pays an annual dividend of $2.01 per share for a current yield of 4.7%.
The top 10 holdings in XLU are NextEra Energy Inc (NEE), Duke Energy Corp (DUK), Southern Co (SO), Dominion Resources, Inc. (D), American Electric Power Company Inc (AEP), PG&E Corporation (PCG), Exelon Corporation (EXC) — the Jan. 8 Trade of the Day— PPL Corp (PPL), Sempra Energy (SRE) and Public Service Enterprise Group Inc. (PEG).
XLU fell from a high just under $50 in January 2015 to a low near $41 in early September. But since March, it has been consolidating in a diamond pattern, which is generally considered a bullish formation, with support at about $42 and resistance at $44.
Recently, downside volume has generally been below normal, while upside volume has been above normal, a positive sign.
XLU is typically considered a long-term investment, and those investors should consider buying it at this juncture. However, shorter-term investors can also buy the ETF near $43 for a trade to $49 within six months. This would result in a gain of 14%, plus dividends.