XLE ETF Review: Is Energy Select SPDR Worth Buying?

Energy Select Sector SPDR is the benchmark U.S. energy ETF with a 0.09% expense ratio, heavily weighted to ExxonMobil and Chevron — providing low-cost exposure to integrated oil majors that generate massive free cash flow in a structurally undersupplied global energy market.

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

What Is XLE?

The Energy Select Sector SPDR (XLE) tracks the Energy Select Sector Index, holding the largest energy companies from the S&P 500. Managed by State Street, it's the granddaddy of energy ETFs—launched in 1998 as one of the original sector SPDRs. The fund owns integrated oil giants, pipeline operators, and energy equipment companies that power America's energy infrastructure.

With just 8 basis points in fees, $26.5 billion in assets, and a 3.3% dividend yield, XLE offers direct exposure to energy's established players.

Current Snapshot

Why It Matters for Real Asset Investors

XLE sits at the intersection of our infrastructure and tollbooth asset pillars. When you own XLE, you're betting that energy remains essential—and that these companies control the critical infrastructure needed to produce, transport, and refine it.

The top two holdings, Exxon Mobil (23.7%) and Chevron (17.6%), aren't just oil companies—they're integrated energy machines with downstream refining, chemical operations, and global infrastructure footprints. Pipeline operators like Williams Companies and Kinder Morgan provide the tollbooth assets that collect fees regardless of commodity prices. These aren't speculative oil plays; they're cash-generating enterprises with decades-old infrastructure and distribution networks.

XLE shines during inflationary periods when energy costs rise and during geopolitical stress when energy security matters. It struggles during recession fears and ESG-driven capital flight, but those periods often create the best entry points for patient real asset investors.

Top Holdings

Exxon Mobil (23.7%): The integrated giant with refining capacity, chemical operations, and Permian Basin production. Trading near 52-week highs as capital discipline pays dividends.

Chevron (17.6%): Lower-cost producer with premium assets in the Permian and international operations. Maintains one of the sector's strongest balance sheets.

ConocoPhillips (7.0%): Pure-play E&P with flexible capital allocation and variable dividend policy tied to cash flow generation.

Williams Companies (4.6%): Natural gas pipeline operator benefiting from ongoing gas-to-coal switching and LNG export growth.

SLB (4.1%): Oilfield services leader (formerly Schlumberger) with global technology and equipment operations.

EOG Resources (4.1%): Shale pioneer with low-cost unconventional drilling expertise and premium Permian acreage.

Kinder Morgan (3.8%): Pipeline infrastructure owner with natural gas transmission networks across key U.S. corridors.

Phillips 66, Valero, Marathon (10.7% combined): Refining operators that benefit from wide crack spreads and steady gasoline demand.

How It Fits the Portfolio

XLE works as a core energy allocation, typically 3-8% of a real assets portfolio depending on macro conditions. It pairs well with utility infrastructure (XLU) and pipeline MLPs for broader energy infrastructure exposure. The fund's large-cap focus and dividend yield make it suitable for conservative allocations, while its commodity sensitivity provides inflation protection.

I'm watching for entry points below $48 when recession fears create temporary selling pressure. Above $52, the risk-reward becomes less compelling unless we're entering a sustained commodity supercycle.

Regime Signals

XLE outperforms during dollar weakness, rising inflation expectations, and energy supply constraints. It benefits from rate cuts that reduce financing costs for capital-intensive operations and geopolitical tensions that highlight energy security. The fund struggles during demand destruction fears, ESG capital flows away from fossil fuels, and dollar strength that pressures commodity prices.

Watch crude oil inventory levels, refining capacity utilization, and natural gas storage data for early signals of sector momentum shifts.

Related Research

• Alabama Power Grid Risk Assessment
• NextEra Energy (NEE) Tollbooth Analysis
• XOP: SPDR S&P Oil & Gas Exploration
• VDE: Vanguard Energy ETF
• USO: United States Oil Fund

Frequently Asked Questions

What is the expense ratio of XLE?

XLE charges just 0.09% annually, making it one of the cheapest sector ETFs available. This rock-bottom fee means investors keep nearly all of the sector's returns. For comparison, most thematic energy ETFs charge 0.35-0.75%. XLE's low cost comes from being a SPDR sector fund tracking the S&P 500 Energy sector — a large, liquid index that is cheap to replicate.

What are the top holdings in XLE?

XLE is heavily concentrated in ExxonMobil and Chevron, which together typically represent 35-45% of the fund. Other major holdings include ConocoPhillips, EOG Resources, Schlumberger, Marathon Petroleum, and Pioneer Natural Resources. This top-heavy concentration means XLE's performance is largely driven by the two oil supermajors, making it less diversified than it appears from its 20+ stock count.

Is XLE a good dividend stock?

XLE typically yields 3-4%, with energy companies having shifted to aggressive shareholder return programs after years of capital discipline. The underlying companies are generating record free cash flow and returning capital through both dividends and share buybacks. However, energy dividends can be cut during commodity downturns, as occurred in 2020. The yield is a function of oil and gas prices, not a guaranteed income stream.

How does XLE fit into the Energy Macro portfolio?

XLE serves as core energy equity exposure within the Energy Macro framework. The thesis is that structural underinvestment in oil and gas production since 2014 has created a supply deficit that will keep energy prices elevated for years. XLE captures this through the companies best positioned to profit — large, low-cost producers with strong balance sheets. It pairs naturally with midstream (AMLP), commodities (DBC), and energy infrastructure positions.

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, State Street Global Advisors