The Utilities Select Sector SPDR Fund (XLU) is one of the most popular ways to get exposure to the defensive utilities sector within the S&P 500. With nearly $15 billion in assets under management, it focuses exclusively on regulated power companies, grid operators, and energy distributors. Utilities may not deliver the flashiest growth, but they play a critical role in diversifying portfolios and cushioning downturns.
| Rank | Ticker | Company Name | % of Fund |
|---|---|---|---|
| 1 | NEE | NextEra Energy Inc | 11.71% |
| 2 | SO | Southern Co | 7.85% |
| 3 | CEG | Constellation Energy Corp | 7.77% |
| 4 | DUK | Duke Energy Corp | 7.25% |
| 5 | VST | Vistra Corp. | 4.89% |
| 6 | AEP | American Electric Power | 4.40% |
| 7 | SRE | Sempra | 4.30% |
| 8 | D | Dominion Energy Inc | 3.88% |
| 9 | XEL | Xcel Energy Inc | 3.48% |
| 10 | EXC | Exelon Corp | 3.37% |
| 11 | PEG | Public Service Enterprise Group | 3.08% |
| 12 | ETR | Entergy Corp | 3.07% |
| 13 | WEC | WEC Energy Group Inc | 2.73% |
| 14 | ED | Consolidated Edison Inc | 2.70% |
| 15 | PCG | PG&E Corporation | 2.42% |
| 16 | NRG | NRG Energy | 2.40% |
| 17 | DTE | DTE Energy Co | 2.18% |
| 18 | AEE | Ameren Corp | 2.08% |
| 19 | PPL | PPL Corp | 2.04% |
| 20 | ATO | Atmos Energy Corp | 2.04% |
| 21 | AWK | American Water Works Co Inc | 2.01% |
| 22 | ES | Eversource Energy | 1.94% |
| 23 | CNP | CenterPoint Energy Inc | 1.91% |
| 24 | FE | FirstEnergy Corp | 1.75% |
| 25 | CMS | CMS Energy Corp | 1.62% |
Investors turn to XLU for stability and its dividend yield. Utilities tend to deliver steady cash flows due to regulated pricing and the provision of essential services, which often translates into above-average yields compared to the broader market. As interest rates stabilize, the group can reemerge as a haven for investors seeking consistency.
Even within utilities, leadership matters. A handful of large companies dominate the index, and their strategies, whether investing in renewables, expanding grid capacity, or optimizing regulated assets, set the pace for the entire sector. To understand where XLU is headed, it’s worth examining its top holdings: NextEra Energy, Southern Company, and Constellation Energy.
1. NextEra Energy (NEE)
NextEra is the clear heavyweight in the utilities space and the largest holding in XLU. The company has built a dual business model: regulated utility Florida Power & Light provides stable, predictable earnings, while NextEra Energy Resources has become the world’s largest producer of renewable energy from wind and solar. This combination provides investors with exposure to both traditional, regulated cash flows and long-term growth opportunities from clean energy.
Financially, NextEra is recognized for its consistent earnings growth, dividend increases, and substantial investment in renewable energy capacity. It benefits from a first-mover advantage in renewables, positioning itself to capitalize on the acceleration of decarbonization goals by states, utilities, and corporations.
For XLU, NextEra brings a growth tilt that most utilities lack. Its outsized weight means its performance heavily influences the ETF, and its renewables pipeline could make it one of the rare utilities that grows faster than GDP for years to come.
2. Southern Company (SO)
Southern Company is one of the largest regulated utilities in the U.S., serving customers across the Southeast. Its business is built on traditional regulated electricity and natural gas utilities, which provide reliable earnings and allow for a stable dividend track record. Southern is also well-known for having one of the more generous yields among large utilities.
The company has faced challenges in the past, particularly with cost overruns in its nuclear expansion projects, but it has managed to maintain financial stability and continue paying attractive dividends. Southern’s steady base of regulated assets gives it resilience against economic volatility, and its regional dominance ensures it remains a utility giant.
In XLU, Southern Company acts as a stabilizer, less growth-focused than NextEra, but providing the predictable dividend income and regulated returns that make utilities a core defensive play.
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3. Constellation Energy (CEG)
Constellation Energy emerged as an independent company after its spinoff from Exelon in 2022, quickly becoming the largest producer of carbon-free energy in the U.S. Its portfolio spans nuclear, wind, solar, hydro, and natural gas. Unlike many utilities, Constellation earns a large portion of revenue from merchant power sales, which gives it more direct exposure to energy price fluctuations.
What sets Constellation apart is its clean energy leadership. As corporate America demands zero-carbon electricity to meet ESG goals, Constellation is positioned as a go-to supplier. Its massive nuclear fleet, responsible for about 20% of U.S. nuclear generation, provides a reliable, carbon-free backbone.
For XLU, Constellation adds a differentiated play: it’s not just about regulated cash flows, but also exposure to carbon-free generation and power markets. That combination provides both opportunity and volatility, making it a compelling but less predictable top holding.
How XLU Performs Differently
XLU is more concentrated than many sector ETFs, with its top 10 holdings making up nearly 60% of the fund. That concentration means the performance of giants like NextEra, Southern, and Constellation will disproportionately affect returns. Investors in XLU aren’t just buying utilities in general, they’re making a leveraged bet on the largest players in the sector.
This structure has helped the ETF perform defensively in market downturns while still benefiting from the growth of clean energy leaders. The combination of dividend yield, defensive positioning, and select growth opportunities makes XLU a versatile tool in both conservative and balanced portfolios.
Key Insights
- Defensive and income-oriented: Utilities are less volatile than the broader market, making XLU a hedge during downturns. Dividend yields are higher than average.
- Concentration risk: With NextEra alone at nearly 12%, a single-company move can significantly impact performance.
- Clean energy exposure: Holdings like NextEra and Constellation tilt the fund toward the renewable energy transition, providing XLU with growth optionality that older utilities lack.
- Interest rate sensitivity: Utilities are bond proxies; falling rates usually help valuations, while rising rates can pressure multiples.
How Power Giants Shape the Utilities Sector
The Utilities Select Sector SPDR Fund (XLU) offers a simple, liquid, and low-cost way to capture the performance of America’s largest power companies. With its mix of stable dividend payers, such as Southern, growth-oriented leaders like NextEra, and carbon-free giants like Constellation, the ETF balances traditional defensive utilities with exposure to the energy transition.
Investors should be aware of concentration risk, particularly the heavy weighting in NextEra, as well as interest rate sensitivity that can create near-term headwinds. Still, for those seeking stability, dividends, and moderate growth in an uncertain market, XLU remains one of the most reliable sector ETFs.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
