Is the Vanguard Utilities ETF the Smartest Income Play You Can Make Right Now?

• This assemblage ETF isn’t the highest-yielding money connected the market, but it’s a astute thought for immoderate investors.

• It's a sneaky play connected a beloved concern theme.

• More involvement complaint cuts could beryllium catalysts for this ETF.

• 10 stocks we similar amended than Vanguard Utilities ETF ›

The utilities assemblage isn't a haven for maturation stocks. Still, utilities stocks person agelong been favored by investors seeking the alluring operation of above-average dividends and debased volatility.

To beryllium just to the antiaircraft sector, determination are occasions erstwhile it generates coagulated returns. Just look astatine the Vanguard Utilities ETF (NYSEMKT: VPU). Last year, that exchange-traded money (ETF) gained 16.5% arsenic utilities ranked arsenic the fourth-best assemblage successful the S&P 500 (SNPINDEX: ^GSPC). The utilities ETF's showing wasn't acold disconnected the gait acceptable by the Vanguard S&P 500 ETF (NYSEMKT: VOO), which jumped 17.8% successful 2025.

A coagulated showing similar that is simply a bonus, considering the awesome dividend yields recovered successful the utilities assemblage by comparison. For its part, the Vanguard assemblage ETF boasts a 30-day SEC output of 2.73%, which is much than treble the output of its S&P 500 counterpart.

That's 1 constituent confirming this utilities money is simply a agleam income idea, but there's much to the story, pointing to the Vanguard ETF joining the ranks of the smartest income bets.

For astir the full lifespan of the utilities sector, the radical has been viewed arsenic a stodgy fixed-income proxy. Still, acknowledgment to the artificial intelligence (AI) boom, the sector's maturation proposition has been refreshed. No, investors won't find "Magnificent Seven" stocks residing successful this Vanguard assemblage ETF. Still, they volition find an array of companies tethered to the soaring powerfulness demands created by AI's acceleration.

Hyperscalers are shelling retired hundreds of billions of dollars annually to physique energy-intensive information centers. That enlargement is applicable to investors considering this utilities ETF, due to the fact that Goldman Sachs forecasts a 2.5% compound yearly maturation complaint (CAGR) successful U.S. powerfulness depletion from 2023 done 2030, with a important information of that summation attributed to information centers.

Some of the ETF's holdings are already generating AI benefits. Constellation Energy, the fund's second-largest component, inked a 20-year powerfulness acquisition statement (PPA) with Meta Platforms last June. The inferior notched a akin accord with Microsoft in September 2024.

Talen Energy, a smaller subordinate of the ETF's lineup, has a 20-year PPA with Amazon to powerfulness an Amazon Web Services (AWS) information halfway successful Pennsylvania.