IDU ETF Review: Is iShares Utilities ETF Worth Buying?

iShares U.S. Utilities ETF rounds out the utility ETF trio alongside XLU and VPU, offering iShares-platform convenience and a slightly different index methodology for investors who prefer BlackRock's ecosystem for utility sector allocation.

Last updated: 2026-02-02 · Data: Yahoo Finance, fund prospectuses, SEC filings

What Is IDU?

The iShares U.S. Utilities ETF tracks the Dow Jones U.S. Utilities Index, providing broad exposure to American utility companies that generate, transmit, and distribute electricity, gas, and water. Managed by BlackRock, this ETF captures the essential infrastructure that keeps the lights on across America—from regulated monopolies to competitive power generators.

With an expense ratio of just 0.38% and $1.66 billion in assets under management since its 2000 inception, IDU offers one of the most cost-effective ways to own a diversified basket of utility stocks.

Current Snapshot

Why It Matters for Real Asset Investors

Utilities represent the ultimate tollbooth assets—regulated monopolies that charge for essential services regardless of economic conditions. When you flip a light switch, you're paying whoever owns the wires, pipes, and power plants that deliver energy to your home. That predictable cash flow makes utilities a cornerstone of any real asset allocation.

IDU fits the Energy Macro thesis as both an inflation hedge and a grid resilience play. Regulated utilities can typically pass through rising costs to consumers, while their rate bases—the asset values on which they earn returns—often adjust upward with inflation. As America's aging grid requires massive capital investment for electrification and resilience, these companies collect returns on every dollar they invest in infrastructure.

The ETF shines during periods of falling interest rates, when investors reach for yield and utility valuations expand. It struggles when rates rise rapidly or when growth stocks dominate, as utilities' bond-like characteristics make them sensitive to rate changes. But over full cycles, utilities deliver steady returns with lower volatility than the broader market.

Top Holdings

NextEra Energy (NEE) - 11.0%: The Florida-based giant combines regulated utility operations with the world's largest renewable development platform. NEE's dual model provides steady regulated returns plus growth from wind and solar projects.

Constellation Energy (CEG) - 7.2%: America's largest nuclear fleet operator, benefiting from clean energy premiums and data center power demand. Nuclear's 24/7 carbon-free power makes CEG a critical AI infrastructure play.

Southern Company (SO) - 6.3%: Traditional Southeast utility with significant regulated rate base growth from natural gas and solar investments. SO's predictable earnings and 4%+ dividend yield epitomize defensive utility investing.

Duke Energy (DUK) - 6.0%: Serves the Carolinas and Florida with a massive grid modernization program. DUK's regulated monopoly status provides steady cash flows as it upgrades infrastructure for electrification.

Waste Management (WM) - 5.3%: The waste collection giant operates recycling facilities and landfills with monopoly-like economics. Rising disposal costs and ESG-driven recycling demand support pricing power.

American Electric Power (AEP) - 4.0%: Ohio-based utility with transmission assets across 11 states. AEP's regulated transmission network benefits from grid interconnection and renewable integration needs.

How It Fits the Portfolio

IDU serves as a core real asset holding for investors seeking steady income and inflation protection without the volatility of energy or commodity funds. Position sizing should reflect its role as a defensive anchor rather than a growth driver—typically 5-15% of a real asset allocation depending on interest rate environment and income needs.

The ETF pairs well with more cyclical energy holdings like oil and gas infrastructure, providing portfolio stability when commodity prices swing. It also complements REIT positions, offering similar yield characteristics with different economic drivers. Watch for entry points during rate spike periods when utility valuations compress, as these companies' underlying monopoly economics remain intact.

Regime Signals

IDU typically outperforms during rate-cutting cycles, recession periods, and low-growth environments when investors prioritize yield and safety. The ETF benefits from dollar weakness that makes U.S. infrastructure assets relatively attractive to foreign investors. Rising electricity demand from data centers, EVs, and heat pumps provides long-term tailwinds regardless of economic cycles.

Conversely, IDU underperforms during rapid rate rises, tech booms that favor growth over yield, and periods when energy commodity prices spike faster than utilities can pass through costs. Watch 10-year Treasury yields and the utilities-to-S&P 500 relative performance ratio for timing signals—utilities often bottom relative to stocks before absolute price bottoms.

Related Research

• Alabama Power Grid Risk Assessment
• NextEra Energy (NEE) Tollbooth Analysis
• VPU: Vanguard Utilities ETF
• XLU: Utilities Select Sector SPDR
• IFRA: iShares U.S. Infrastructure ETF

Frequently Asked Questions

How does IDU compare to XLU and VPU?

IDU holds approximately 45 utility stocks, placing it between XLU (~30) and VPU (65+) in breadth. All three are market-cap weighted, charge sub-0.40% fees, and deliver nearly identical returns over time. IDU's 0.39% expense ratio is noticeably higher than XLU (0.09%) and VPU (0.10%), which makes it the least cost-efficient option. IDU is primarily chosen by investors who prefer consolidating holdings within the iShares platform.

What is the expense ratio of IDU?

IDU charges 0.39% annually, which is significantly higher than XLU (0.09%) and VPU (0.10%). This 0.30% annual cost premium compounds over time — over 10 years, it can reduce returns by 3% or more versus cheaper alternatives. Unless there is a specific reason to use the iShares platform, XLU or VPU offer identical utility exposure at a fraction of the cost.

What is the dividend yield of IDU?

IDU yields approximately 2.5-3.5%, similar to XLU and VPU, since all three hold the same underlying utility companies with similar weighting. The higher expense ratio slightly reduces the net yield versus cheaper alternatives. For income-focused investors, the fee difference means IDU delivers modestly less income per dollar invested than XLU or VPU.

When would an investor choose IDU over XLU or VPU?

IDU makes sense for investors who use BlackRock's iShares platform exclusively and value the convenience of consolidating all holdings with one provider. Some advisory platforms offer commission-free iShares trading, which could offset the higher expense ratio for smaller accounts. However, for most investors, XLU or VPU provide clearly superior cost efficiency for identical utility sector exposure.

For our complete allocation framework across real assets, infrastructure, and income strategies, see The Blackout Fortune Playbook.

Last updated: February 1, 2026 | Data: Yahoo Finance, BlackRock filings