The State Street Energy Select Sector SPDR ETF (NYSEMKT:XLE) offers low-cost, pure energy exposure, whereas the First Trust North American Energy Infrastructure Fund (NYSEMKT:EMLP) provides a utility-heavy infrastructure play with higher fees.
Both funds provide access to North American energy assets, but they approach the space with distinct strategies. While XLE tracks the energy components of the S&P 500 to capture major oil and gas producers, EMLP targets infrastructure and utilities, including master limited partnerships and renewable energy production.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
State Street Energy Select Sector SPDR ETF is significantly more affordable, sporting a thin expense ratio of 0.08% compared to the 0.95% fee for First Trust North American Energy Infrastructure Fund. This 0.87 percentage point cost difference represents a substantial headwind for investors in EMLP, while the trailing-12-month dividend yields remain similar with a narrow 0.11 percentage point gap.
Performance & risk comparison
What’s inside
The State Street Energy Select Sector SPDR ETF is 100% focused on the energy sector, holding 21 securities. Its largest positions include ExxonMobil at 20.19%, Chevron at 14.85%, and ConocoPhillips at 5.93%. The fund was launched in 1998. State Street Energy Select Sector SPDR ETF has paid $1.52 per share over the trailing 12 months, which on its recent ~$57.02 share price works out to a 2.60% yield.
The First Trust North American Energy Infrastructure Fund holds 65 securities, with a sector tilt of 54% utilities, 28% energy, and 8% cash and others. Its largest positions include Enterprise Products Partners (NYSE:EPD) at 7.73% and Energy Transfer (NYSE:ET) at 7.59%. The fund was launched in 2012. First Trust North American Energy Infrastructure Fund has paid $1.21 per share over the trailing 12 months, which on its recent ~$44.31 share price works out to a 2.70% yield. It also features an environmental, social, and governance (ESG) screen. For more guidance on ETF investing, check out the full guide at this link.
What this means for investors
Ask two energy investors what they own and you might get very different answers. One may hold a fund that surges when oil prices climb and stumbles when they fall. The other could hold a fund where pipelines and power lines generate steady income regardless of what happens at the pump. Both call themselves energy funds, but only one actually behaves like one.
XLE is the straightforward oil and gas play here. Exxon and Chevron alone account for roughly a third of the fund, meaning XLE rises and falls closely with crude prices. When energy demand is strong and oil is expensive, XLE rewards investors handsomely. When commodity prices fall, the losses follow.
EMLP is built for a different kind of investor. Its actively managed portfolio blends pipelines and energy infrastructure with a substantial allocation to regulated utilities, which generate steady, contract-based income regardless of where oil prices go. That defensive mix has delivered more consistent returns than XLE during volatile energy markets, but at a cost that is nearly 12 times higher.
For most long-term investors, XLE’s simplicity, massive scale, and rock-bottom cost make it the more practical energy holding. EMLP appeals to those who specifically want a defensive, income-oriented energy infrastructure fund and are comfortable paying a significant premium for active management and utility exposure.
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Sara Appino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips and Enterprise Products Partners. The Motley Fool has a disclosure policy.
Which Energy ETF Is the Better Buy: State Street’s XLE or First Trust’s EMLP? was originally published by The Motley Fool
