Should You Invest in the iShares U.S. Energy ETF (IYE)?

Designed to provide broad exposure to the Energy - Broad segment of the equity market, the iShares U.S. Energy ETF (IYE) is a passively managed exchange traded fund launched on 06/12/2000.

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Energy - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.

Index Details

The fund is sponsored by Blackrock. It has amassed assets over $1.40 billion, making it one of the larger ETFs attempting to match the performance of the Energy - Broad segment of the equity market. IYE seeks to match the performance of the Dow Jones U.S. Oil & Gas Index before fees and expenses.

The Russell 1000 Energy RIC 22.5/45 Capped Gross Index measures the performance of the energy sector of the U.S. equity market.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.40%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.61%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Energy sector--about 97.30% of the portfolio.

Looking at individual holdings, Exxon Mobil Corp (XOM) accounts for about 22.36% of total assets, followed by Chevron Corp (CVX) and Conocophillips (COP).

The top 10 holdings account for about 70.85% of total assets under management.

Performance and Risk

The ETF has gained about 8.06% and is up about 15.45% so far this year and in the past one year (as of 06/05/2024), respectively. IYE has traded between $40.84 and $51.17 during this last 52-week period.

The ETF has a beta of 1.24 and standard deviation of 27.45% for the trailing three-year period, making it a high risk choice in the space. With about 44 holdings, it has more concentrated exposure than peers.

Alternatives

IShares U.S. Energy ETF holds a Zacks ETF Rank of 1 (Strong Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, IYE is an excellent option for investors seeking exposure to the Energy ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Vanguard Energy ETF (VDE) tracks MSCI US Investable Market Energy 25/50 Index and the Energy Select Sector SPDR ETF (XLE) tracks Energy Select Sector Index. Vanguard Energy ETF has $8.41 billion in assets, Energy Select Sector SPDR ETF has $37.43 billion. VDE has an expense ratio of 0.10% and XLE charges 0.09%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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iShares U.S. Energy ETF (IYE): ETF Research Reports

Chevron Corporation (CVX) : Free Stock Analysis Report

Exxon Mobil Corporation (XOM) : Free Stock Analysis Report

ConocoPhillips (COP) : Free Stock Analysis Report

Energy Select Sector SPDR ETF (XLE): ETF Research Reports

Vanguard Energy ETF (VDE): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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