Question 1

Are utilities ETFs good for income investing?

Accepted Answer

Utilities ETFs are among the best sectors for income investing, typically offering dividend yields of 2.5% to 4%, well above the broad market average. The regulated nature of utility businesses provides stable cash flows that support consistent dividend payments. Many utility companies have long histories of dividend growth. For maximum tax efficiency, consider holding utilities ETFs in tax-advantaged accounts since their dividends are often taxed as ordinary income.

Question 2

How do utilities ETFs perform when interest rates rise?

Accepted Answer

Utilities ETFs historically underperform when interest rates rise sharply because their relatively high dividend yields become less attractive compared to bonds and savings accounts. Higher rates also increase borrowing costs for capital-intensive utility projects. However, moderate rate increases in a growing economy can be absorbed, and the current surge in electricity demand is providing a growth catalyst that has made utilities more resilient to rate increases than in prior cycles.

Question 3

What is driving electricity demand growth for utilities?

Accepted Answer

Several structural forces are driving unprecedented electricity demand growth: the rapid buildout of AI data centers requiring massive power capacity, the electrification of transportation through EV adoption, industrial reshoring bringing manufacturing back to domestic markets, and population growth in Sun Belt regions. This demand growth is reversing decades of flat electricity consumption and has made utilities ETFs attractive not just for income but also for growth potential.

Question 4

Should I invest in water ETFs?

Accepted Answer

Water ETFs offer exposure to a unique investment theme driven by global water scarcity, aging infrastructure, stricter quality regulations, and population growth. These funds invest in water utilities, treatment companies, infrastructure providers, and technology firms. Water demand is non-discretionary and growing, providing a defensive growth profile. Water ETFs tend to be less interest rate sensitive than broad utilities ETFs because many holdings are industrial companies rather than regulated utilities.

Symbol▼	Fund Name▼	Issuer	Type	AUM▲	Expense Ratio▼	Price▼	YTD▼
POWR	iShares U.S. Power Infrastructure ETF	iShares	Infrastructure	$454.1M	0.40%	$26.31	+13.81%
RSPU	Invesco S&P 500 Equal Weight Utilities ETF	Invesco	Equal Weight S&P 500	$558.9M	0.40%	$81.17	+10.10%
HYGH	iShares Interest Rate Hedged High Yield Bond ETF	iShares	Corporate Bond High Yield Bond	$591.1M	1.12%	$86.28	+0.01%
FTRB	Federated Hermes Total Return Bond ETF	Federated Hermes	Income Emerging Markets	$592.2M	0.51%	$24.79	-2.46%
LVHD	Franklin U.S. Low Volatility High Dividend Index ETF	Franklin Templeton	Low Volatility High Dividend Dividend High Yield Bond VIX	$628.2M	0.27%	$45.48	+13.79%
CDC	VictoryShares US EQ Income Enhanced Volatility Wtd ETF	Victory Capital	High Dividend Dividend Income Large Cap Value Technology VIX	$735.0M	0.38%	$76.88	+16.37%
FDV	Federated Hermes U.S. Strategic Dividend ETF	Federated Hermes	Dividend Growth High Dividend Dividend Mid Cap Large Cap	$799.1M	0.61%	$33.05	+15.13%
FXU	First Trust Utilities AlphaDEX Fund	First Trust	Utilities	$812.7M	0.61%	$49.80	+11.69%
GII	State Street SPDR S&P Global Infrastructure ETF	SPDR	Infrastructure	$933.9M	0.40%	$76.26	+10.10%
BKGI	BNY Mellon Global Infrastructure Income ETF	BNY Mellon	Real Estate Infrastructure Oil & Gas Dividend Income Long-Term Bond	$1.21B	0.65%	$45.61	+14.28%
IDU	iShares U.S. Utilities ETF	iShares	Utilities	$1.41B	0.38%	$115.90	+8.12%
UTES	Virtus Reaves Utilities ETF	Virtus	Income	$1.41B	0.49%	$80.44	+3.90%
PFFD	Global X - U.S. Preferred ETF	Global X	Preferred Stock	$2.14B	0.23%	$18.44	-2.91%
FUTY	Fidelity MSCI Utilities Index ETF	Fidelity	Utilities	$2.35B	0.08%	$58.86	+7.79%
ICLN	iShares Global Clean Energy ETF	iShares	Clean Energy ESG	$2.42B	0.39%	$17.66	+8.22%
HYMB	State Street SPDR Nuveen ICE High Yield Municipal Bond ETF	SPDR	High Yield Bond Municipal Bond	$3.07B	0.35%	$24.96	-0.24%
FIXD	First Trust Smith Opportunistic Fixed Income ETF	First Trust	Income Long-Term Bond	$3.23B	0.65%	$42.94	-3.28%
UCON	First Trust Smith Unconstrained Bond ETF	First Trust	Income Long-Term Bond	$3.25B	0.86%	$24.57	-2.56%
EMLP	First Trust North American Energy Infrastructure Fund	First Trust	Active Clean Energy Infrastructure Natural Gas Oil Oil & Gas Dividend Income	$4.00B	0.95%	$44.24	+18.41%
IFRA	iShares U.S. Infrastructure ETF	iShares	Infrastructure	$4.66B	0.30%	$61.71	+19.14%
ISTB	iShares Core 1-5 Year USD Bond ETF	iShares	Corporate Bond High Yield Bond	$5.09B	0.06%	$47.98	-1.66%
SHYG	iShares 0-5 Year High Yield Corporate Bond ETF	iShares	Corporate Bond High Yield Bond	$7.58B	0.30%	$42.07	-1.96%
ICSH	iShares Ultra Short Duration Bond Active ETF	iShares	Income Inverse	$8.05B	0.08%	$50.50	-0.16%
VPU	Vanguard Utilities ETF	Vanguard	Water	$10.80B	0.09%	$197.13	+7.79%
IGF	iShares Global Infrastructure ETF	iShares	Infrastructure	$11.01B	0.39%	$66.95	+9.89%
HYG	iShares iBoxx $ High Yield Corporate Bond ETF	iShares	Corporate Bond High Yield Bond	$15.88B	0.49%	$79.28	-1.74%
XLU	State Street Utilities Select Sector SPDR ETF	SPDR	Clean Energy Water S&P 500	$23.77B	0.08%	$45.74	+8.43%
HEWP	iShares Currency Hedged MSCI Spain ETF	iShares	Utilities	—	—	—	—
HEWI	iShares Currency Hedged MSCI Italy ETF	iShares	Diversified	—	—	—	—
MAAX	VanEck Muni Allocation ETF	VanEck	Multi-Asset Active Income Corporate Bond Municipal Bond	—	—	$20.72	—
GHII	Invesco S&P High Income Infrastructure ETF	Invesco	Infrastructure Income	—	—	—	—

Utilities ETFs

Frequently Asked Questions