Vanguard Utilities ETF may yield substantial long-term gains
Utilities are often seen as dull businesses. However, they provide steady returns, making them good investment options for long-term wealth growth. One simple way to invest in this sector is through the Vanguard Utilities ETF, which has delivered an average annual return of 9.6% over its 20-year history. If someone invests $250 a month into this ETF, it could potentially grow to $773,921 in about 35 years. The Vanguard Utilities ETF focuses on utility companies that supply essential services like electricity, natural gas, and water. These businesses tend to have stable earnings due to continuous demand for their services. Government regulation keeps their rate increases slow and steady. As a result, utilities can consistently pay dividends to their investors while also investing in their infrastructure and operations. Currently, the ETF includes 69 utility stocks, which pay above-average dividends, giving the fund a yield of 2.9%. This yield is more than double the average yield of S&P 500 dividend stocks, which stands at 1.3%. Moreover, the dividends can grow over time as utilities increase their payouts. Although U.S. electricity demand has recently grown slowly, utilities have still managed to raise their earnings by about 4% each year, mainly through investments in cleaner energy. This trend is expected to change significantly in the coming years. Experts predict that U.S. power demand will increase by 55% by 2040, driven by advancements such as artificial intelligence and electric vehicles. Utility companies, like NextEra Energy and Constellation Energy, are optimistic about strong growth in the near future. NextEra Energy expects to grow its earnings by 6% to 8% annually through at least 2027, while Constellation Energy anticipates 10% growth through 2028. Overall, the Vanguard Utilities ETF offers a low-risk investment opportunity that could provide substantial returns in the coming decades as demand for electricity is expected to rise significantly.