Should You Invest in the iShares U.S. Utilities ETF (IDU)?

If you're interested in broad exposure to the Utilities - Broad segment of the equity market, look no further than the iShares U.S. Utilities ETF (IDU), a passively managed exchange traded fund launched on 06/12/2000.

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Utilities - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 2, placing it in top 13%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $973.48 million, making it one of the average sized ETFs attempting to match the performance of the Utilities - Broad segment of the equity market. IDU seeks to match the performance of the Dow Jones U.S. Utilities Index before fees and expenses.

The Russell 1000 Utilities RIC 22.5/45 Capped Index measures the performance of the utilities sector of the U.S. equity market. It includes companies in the following sectors: electricity and gas, water and multi-utilities.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.39%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.43%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Utilities sector--about 90.70% of the portfolio.

Looking at individual holdings, Nextera Energy Inc (NEE) accounts for about 14.02% of total assets, followed by Duke Energy Corp (DUK) and Southern (SO).

The top 10 holdings account for about 52.16% of total assets under management.

Performance and Risk

The ETF has lost about -1.75% and is up roughly 2.99% so far this year and in the past one year (as of 01/24/2023), respectively. IDU has traded between $76.38 and $95.89 during this last 52-week period.

The ETF has a beta of 0.51 and standard deviation of 26.43% for the trailing three-year period, making it a medium risk choice in the space. With about 48 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Utilities ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IDU is an excellent option for investors seeking exposure to the Utilities/Infrastructure ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Utilities ETF (VPU) tracks MSCI US Investable Market Utilities 25/50 Index and the Utilities Select Sector SPDR ETF (XLU) tracks Utilities Select Sector Index. Vanguard Utilities ETF has $5.60 billion in assets, Utilities Select Sector SPDR ETF has $15.88 billion. VPU has an expense ratio of 0.10% and XLU charges 0.10%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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iShares U.S. Utilities ETF (IDU): ETF Research Reports

NextEra Energy, Inc. (NEE) : Free Stock Analysis Report

Southern Company The (SO) : Free Stock Analysis Report

Duke Energy Corporation (DUK) : Free Stock Analysis Report

Utilities Select Sector SPDR ETF (XLU): ETF Research Reports

Vanguard Utilities ETF (VPU): ETF Research Reports

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