A Cheap ETF for Income-Oriented Investors Looking for Safety
If you are worried about a market crash or just want to add some stability to your portfolio, then the Vanguard Utilities Index Fund ETF Shares (NYSEArca:VPU) could be a great option for you. The fund is made up nearly entirely of utility companies.
Its largest holding is NextEra Energy, which makes up 16% of the fund's total assets. Duke Energy (NYSE:DUK), Southern Company (NYSE:SO), and Dominion Energy (NYSE:D) all make up at least 6% each. But beyond that, no other stock accounts for even 5% of the ETF's assets.
The average stock in the fund trades at a price-to-earnings multiple of under 22.
Contrast that with the typical stock within the S&P 500 where that multiple is above 27 and it is easy to see why there is some great value here. This ETF also pays a yield of 3.2%, which, on a $25,000 investment could generate $800 per year in dividends.
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In the past year, the fund hasn't done too well, falling more than 13% in value.
However, as investors turn to safety amid rising valuations, utility stocks could soon become much more attractive buys and it wouldn't be surprising for the fund to rise in value and recover before the year is over.
The ETF charges a modest net expense ratio of 0.1% and could be well worth the safety net that it offers. It is one of the better buys out there right now for risk-averse investors and this is an investment you can hold in your portfolio for many years.