A growing population is increasing the demand for utilities like water, electricity, and gas. The utility sector is known for its defensive nature because of the inelastic demand for utilities. Given the economic and stock market uncertainties, the sector is gaining significant investor attention.
As reiterated by Chair Jerome Powell at the Jackson Hole economic symposium speech, the Fed's commitment to fighting inflation could mean renewed concerns about a recession. Therefore, the market is expected to remain volatile.
Therefore, investing in ETFs that offer significant exposure to the utility sector could be a wise decision now. To that end, one might consider investing in Prominent water ETFs, Invesco Water Resources ETF (PHO), First Trust Water ETF (FIW), and iShares Global Utilities ETF (JXI).
Invesco Water Resources ETF (PHO)
PHO is a water-themed fund of U.S. companies that create products that conserve and purify water for homes, businesses, and industries. The fund invests in growth and value stocks of companies across diversified market capitalization. It seeks to track the performance of the NASDAQ OMX US Water Index by using the full replication technique.
The fund has approximately $1.76 billion in assets under management (AUM). PHO’s major holdings include Xylem Inc. (XYL), Danaher Corporation (DHR), and Ecolab Inc. (ECL).
The ETF distributes $0.13 in dividends annually, translating to a yield of 0.23%. Its four-year average dividend yield is 0.4%.
PHO has a 0.60% expense ratio, slightly higher than the 0.57% category average. The fund has gained 6.9% over the past month and is currently trading at $52.80, 22.2% above its 52-week low of $43.22.
It is no surprise that PHO has an overall B rating, which equates to Buy in our POWR Ratings system.
The ETF also has a B rating for Trade and Buy & Hold. To see PHO’s POWR Ratings for Peer grade, click here. Of the 6 ETFs in the Water Equities ETFs group, PHO is ranked #2.
First Trust Water ETF (FIW)
FIW offers exposure to the First Trust ISE Water Index Fund, which selects growth and value stocks of companies operating across utilities, water utilities, and wastewater treatment industries. In addition, its tiered equal-weighting scheme boosts the weight of small- and micro-cap companies, reducing concentration.
The fund has approximately $1.28 Billion AUM. FIW’s major holdings include IDEX Corporation (IEX), XYL, and Essential Utilities, Inc. (WTRG).
The ETF distributes $0.37 in dividends annually, translating to a yield of 0.39%. Its four-year average dividend yield is 0.6%.
FIW has a 0.53% expense ratio, lower than the 0.57% category average. FIW has gained 8.5% over the past month and is currently trading at $83.15, 23.2% higher than its 52-week low of $67.47.
FIW’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall B grade, equating to a Buy rating in our proprietary rating system.
FIW also has a B rating for Trade, Buy & Hold, and Peer. Click here to access FIW’s component grades. It is ranked #3 in the same group.
iShares Global Utilities ETF (JXI)
JXI invests in growth and value stocks of large-cap companies operating across the utility sector and tracks the S&P Global 1200 Utilities Capped Index's performance using a representative sampling technique.
The fund has approximately $193.10 million AUM. JXI’s major holdings include NextEra Energy, Inc. (NEE), Duke Energy Corporation (DUK), and Southern Company (SO).
The ETF distributes $1.83 in dividends annually, translating to a dividend yield of 3%. Its four-year average dividend yield is 3.1%. JXI has a 0.40% expense ratio, which is at par with the category average.
The ETF has gained 7.4% over the past month and is currently trading at $64.53, 14.6% above its 52-week low of $56.50.
JXI’s POWR Ratings reflect this promising outlook. The ETF has an overall A grade, which equates to a Strong Buy in our proprietary rating system.
JXI also has an A rating for Trade, Peer, and Buy & Hold. Click here to see JXI’s component grades. JXI is ranked #1 in the same group.
PHO shares fell $0.15 (-0.29%) in after-hours trading Friday. Year-to-date, PHO has declined -16.22%, versus a -14.03% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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