What XLU actually is

XLU follows the utility companies in the S&P 500, one of the Select Sector SPDR funds.

What is inside

Regulated and unregulated power companies such as NextEra Energy, Southern Company, Duke Energy and others. They are capital-intensive businesses with regulated returns.

Distributions

XLU pays quarterly. Utilities distribute a large share of profit, so the yield is usually above the market. Growth in the dividend is slow and steady.

What to keep in mind

  • Interest rates. Utilities fall when rates rise, because bonds become more attractive.
  • Debt. They borrow a lot to invest.
  • Regulation. Rates are set by regulators.

Quick take

XLU is a defensive income fund, rate-sensitive, for those who want steady utility dividends.