Top ETFs In Neglected Telecom Sector

September 02, 2016

 

Other ETF Options

Aside from VOX, there are a few other U.S. telecom ETFs that have gathered a respectable amount of assets under management. The iShares U.S. Telecommunications ETF (IYZ), with $600 million in AUM, is one of them, and is up 13.1% year-to-date.

IYZ tracks the Dow Jones U.S. Select Telecommunications Index. Like the aforementioned MSCI index, it caps the weights of the two giants in the space, but it adds an additional constraint: "The aggregate weight of the five largest companies in the index is capped at 65%."

The result is a significantly reduced weighting in AT&T and Verizon―about 10% each―and higher weightings in companies like Sprint and T-Mobile.

IYZ currently has a distribution yield of 1.6%.

The $160 million Fidelity MSCI Telecommunication Services ETF (FCOM) is another fund in the space. Its 0.08% expense ratio is the lowest in the segment, beating out IYZ's 0.44% and even VOX's 0.10%.

FCOM tracks a similar index as VOX, the MSCI USA IMI Telecommunication Services 25/50. Year-to-date, the ETF is up 14.3% and currently has a distribution yield of 2.2%.

Finally, the SPDR S&P Telecom ETF (XTL), with $29 million in assets, completely skirts the issue of concentration by equal-weighting its portfolio. Currently, no individual stock within the fund has more than a 4% weighting.

Even with its dramatically different weighting scheme, XTL's total return of 13.7% this year is in line with the other telecom ETFs (though it's underperformed over the last five years, as can be seen from the chart below). The fund has a 12-month yield of 1.2% and an expense ratio of 0.35%.

5-Year Returns For VOX, IYZ, XTL

 

Contact Sumit Roy at [email protected].

 

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