The United States last week announced its largest-ever oil reserves release to combat rising oil prices. Oil prices slipped on the news. However, JP Morgan Chase & Co. (JPM) believes that the larger-than-expected loss of Russia’s oil supply could drive up crude prices again in the near term.
However, the U.S oil industry is not in any rush to increase supply. Investor pressure to maintain capital discipline is seen as the primary reason for the production restraint of publicly traded oil producers.
So, given the market uncertainties, we think the top-rated energy ETFs–Energy Select Sector SPDR Fund (XLE), Alerian MLP ETF (AMLP), and iShares Global Energy ETF (IXC)--which yield more than 3% on current prices, might be ideal bets.
Energy Select Sector SPDR Fund (XLE)
XLE aims to provide before expenses investment results that correspond with the price and yield performance of the Energy Select Sector Index companies. The fund follows a replication strategy and offers exposure to the United States energy sector and can be used as a tactical overlay for investors looking for exposure when oil prices show promise.
As of March 31, XLE’s top holdings included Exxon Mobil Corporation (XOM), with a 22.23% fund weighting, Chevron Corporation (CVX), with a 21.45% weighting, and EOG Resources, Inc. (EOG), with a 4.77% weighting. The fund had $37.03 billion in assets under management as of April 1 and a NAV of $77.08. XLE’s 0.10% expense ratio is considerably lower than the 0.46% category average. With a 1.67 beta, the ETF’s fund flows came in at $1.02 billion over the past year.
XLE’s $2.16 annual dividend yields 3.75% at the current share price. XLE has gained 53.2% over the past year and 38.9% year-to-date to close Friday’s trading session at $77.06.
XLE’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree. The ETF has an overall A rating, which equates to Strong Buy in our proprietary rating system. The fund has an A grade for Trade and Buy & Hold. In the 45-ETF Energy Equities ETFs group, it is ranked #1. The group is rated B.
Click here to see the additional POWR Rating for XLE (Peer).
Alerian MLP ETF (AMLP)
AMLP seeks to track investment results that correspond before fees and expenses, to the price and yield performance of the Alerian MLP Infrastructure Index, which comprises energy infrastructure Master Limited Partnerships (MLPs). The fund provides a play in the U.S. MLP sector by holding all its assets in domestic equities.
AMLP’s holdings include Energy Transfer LP (ET), with an 11.22% weight, Enterprise Products Partners LP (EPD), with a 10.17% weight, and Magellan Midstream Partners LP (MMP), with a 9.98% weight. As of March 31, the ETF had a $38.47 NAV and $6.52 billion in total net assets. Its fund flows have come in at $659.16 million over the past six months. AMLP has 0.87% total operating expenses, versus the 0.83% category average.
The fund’s $2.80 annual dividend rate yields 7.99% on current prices. It has a 1.91 beta. AMLP has gained 23.3% over the past year and 17.2% year-to-date to close Friday’s trading session at $38.38.
It is no surprise that AMLP has an overall A rating, which translates to Strong Buy in our POWR Ratings system. The ETF has a Trade and Buy & Hold grade of A. In the 21-ETF MLP ETFs group, it is ranked #1. The industry is rated A.
To see the additional POWR Rating for Peer for AMLP, click here.
iShares Global Energy ETF (IXC)
IXC aims to track the investment results of an index composed of global equities in the energy sector. The ETF generally invests at least 80% of its assets in the component securities of the underlying index or securities with similar economic characteristics. The fund offers exposure to the global energy industry.
As of April 1, IXC had a NAV of $36.53 and $2.31 billion in net assets. The fund’s top holdings include XOM, with a 13.83% weighting, CVX, with a 12.44% weighting, and Shell PLC (SHEL), with an 8.35% weighting. The fund’s expense ratio stands at 0.43%, which is lower than the 0.46% category average. Its fund flows have come in at $342.74 million over the past year.
The ETF’s annual $1.02 dividend yields 3.54% on current prices. It has a beta of 1.41 and has gained 45.4% over the past year to close Friday’s trading session at $36.49. It has gained 32.6% year-to-date.
This promising outlook is reflected in IXC’s POWR Ratings. The ETF has an overall A rating, which equates to Strong Buy in our proprietary rating system. IXC has a Trade and Buy & Hold grade of A. It is ranked #5 in the Energy Equities ETFs group.
In addition to the POWR Rating grades we have stated, one can see the IXC rating for Peer here.
XLE shares were trading at $76.61 per share on Monday morning, down $0.45 (-0.58%). Year-to-date, XLE has gained 39.36%, versus a -4.19% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
3 Top-Rated Energy ETFs That Yield More Than 3% StockNews.com
