Vanguard Utilities ETF

VPU

Market cap $8.82B

This Vanguard ETF protects your downside without sacrificing upside potential. Juicy dividends could help you take advantage of other opportunities.

Vanguard Utilities Index Fund ETF provides exposure to U.S. utilities, benefiting from surging electricity demand and robust sector momentum. The utility sector has exhibited a powerful momentum since the beginning of the year, driven mainly by unprecedented AI infrastructure investments, growth in PPAs, and favorable regulatory developments. A strong electricity demand profile could secure up to a 10% return for investors in the VPU ETF over the next 12-month horizon.

For decades, utilities have been used primarily as an equity income vehicle. The artificial intelligence (AI) buildout helps turn utilities stocks into more of a growth and income story today.

As AI fatigue rattles markets with sell-offs hitting trucking, logistics and real estate services, rotating into defensive ETFs becomes attractive.

The Vanguard Utilities Index Fund ETF Shares (NYSEARCA:VPU) generates its 2.73% dividend yield by holding a diversified portfolio of 67 utility companies across the electric, gas, and water sectors.

From "software-mageddon" to rising AI capex pressuring Big Tech, diversification via defensive and global ETFs gains focus.

This ETF is an excellent option for investors who want a great dividend with low risk. The Vanguard fund charges an extremely low expense ratio of just 0.09%.

I am upgrading Vanguard Utilities Index ETF (VPU) to a "Buy," citing improved valuation and technical support. VPU's PEG ratio has improved, with long-term earnings growth rising and a fair 17.8x P/E multiple. The ETF offers a 2.71% yield, strong liquidity, and record-high cumulative dividends last year.

This sector ETF isn't the highest-yielding fund on the market, but it's a smart idea for some investors. It's a sneaky play on a beloved investment theme.

Investing for the long term allows you to not have to worry about day-to-day market developments. These Vanguard funds have minimal fees and can be valuable investments to hang on to for decades.