🤝 BFF Take
VPU Wins on Breadth — XLU Wins for Traders Who Need Options Liquidity
XLU (Utilities Select Sector SPDR) and VPU (Vanguard Utilities ETF) are both excellent, ultra-low-cost utilities sector ETFs. XLU holds 30 S&P 500 utility companies — NextEra Energy, Southern Company, Duke Energy, and Dominion Energy dominate. VPU holds ~65 utility companies including mid-cap regulated utilities not in the S&P 500. Both charge essentially nothing: XLU 0.09%, VPU 0.10%. Utilities are the classic defensive, rate-sensitive sector — they pay large dividends, have regulated business models, and underperform in rising rate environments but hold up well in recessions. XLU's massive trading volume ($1B+/day) makes it the preferred vehicle for tactical traders and hedgers using utilities for defensive positioning. VPU's additional mid-cap coverage is a slight advantage for long-term holders.
📋 Quick Takeaways
⚡XLU holds 30 S&P 500 utilities; VPU holds ~65 — broader mid-cap utility coverage in VPU
💰XLU costs 0.09%; VPU costs 0.10% — effectively identical; both pay 3-4% dividend yield
🛡️Utilities are defensive — low correlation to tech/growth; hold up in recessions but fall when rates rise
📊 Data-Based Take: VPU has the lower fee
Whether the lower-cost fund suits your situation depends on your existing holdings, account type, tax situation, and how you use each fund. This is a cost comparison, not a personalized recommendation.
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Reviewed by a CFA® Charterholder · Data updated Jun 2026 · Educational only, not financial advice
XLU
Utilities Select Sector SPDR Fund
VPU
Vanguard Utilities ETF
📋 XLU vs VPU — Key Facts Side by Side
| Metric |
XLU |
VPU |
| Fund Name |
Utilities Select Sector SPDR Fund |
Vanguard Utilities ETF |
| Issuer |
State Street |
Vanguard |
| Tracks Index |
Utilities Select Sector Index |
MSCI US IMI Utilities 25/50 |
| Expense Ratio |
0.09% ✓ |
0.10% |
| Cost per $10K/yr |
$9.00 |
$10.00 |
| AUM |
$15B |
$6B |
| Holdings |
30 |
65 |
| Inception |
1998 |
2004 |
| 1-Year Return |
+18.60% |
+19.20% |
| 3-Year Return |
-2.80% |
-2.40% |
| 5-Year Return |
+4.40% |
+4.80% |
| Avg Bid-Ask Spread |
0.01% |
0.01% |
Data from ETF BFF database. Returns are annualised. Not investment advice.
📊 XLU vs VPU — Annualised Returns
Annualised returns (trailing, price-based). Past performance does not guarantee future results.
🎯 Should You Buy XLU or VPU?
Choose if...
XLU
- You want the lowest fees — saves ~$1/yr per $10K vs VPU
- You already use State Street and prefer staying within their fund family
Choose if...
VPU
- You want broader diversification (65 holdings vs 30)
- You already use Vanguard and prefer staying within their fund family
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❓ XLU vs VPU — Frequently Asked Questions
Are utilities a good investment?
Utilities provide portfolio defense and income — they are among the least volatile sectors in equity markets. Their regulated business models provide predictable cash flows and high dividends (3-4%). However, utilities are rate-sensitive — they fell 20%+ in the 2022 rate hike cycle because higher rates make utility dividends less attractive and increase borrowing costs. The AI data center buildout has created a new growth narrative for utilities as electricity demand from data centers accelerates, benefiting companies like NextEra Energy.
What dividend yield do XLU and VPU pay?
Both XLU and VPU typically yield 3-4%, making them meaningful income sources within a defensive equity allocation. The yield fluctuates with stock prices — when utility stocks fall (as in 2022), the yield rises; when they rally, the yield compresses. The income is from utility companies' regulated dividend payments, which are generally stable and growing slowly.
How do utilities compare to bonds for income?
Utilities occupy a middle ground between bonds and stocks. They offer higher current income than most bonds with potential price appreciation, but also carry equity volatility. In low-rate environments, utilities' 3-4% yield is attractive vs 2% bonds. In high-rate environments (like 2022-2023), US Treasuries yielding 5% make utility yields less compelling and hurt utility valuations. Utilities are sometimes called "bond proxies" for this reason.
Does the AI data center boom affect utilities ETFs?
Yes — significantly. AI data centers require enormous amounts of electricity, and power demand in the US is growing faster than it has in decades. Utilities that are positioned to supply data center power (particularly those in regions with new hyperscale data center construction) have become growth stories. NextEra Energy, Constellation Energy, and Vistra Corp have seen institutional interest related to data center power demand. This has made utility ETFs more interesting to growth investors, not just defensive income seekers.
What is IDU compared to XLU and VPU?
IDU (iShares US Utilities ETF) is a third option at 0.40% — much more expensive than both XLU (0.09%) and VPU (0.10%) for similar utility exposure. There is essentially no reason to pay IDU's fee when XLU and VPU provide comparable exposure at one-quarter the cost. XLU and VPU are clearly the two best utilities ETF options for most investors.
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ℹ️ Data shown is for educational purposes and may not reflect the most current figures. Returns are trailing price-based and exclude dividend reinvestment. Past performance does not guarantee future results. ETF BFF is not a licensed financial advisor — this is not personalized financial advice.