XOP vs. EMLP: Should You Buy a Low-Cost Oil Fund or Higher-Yield Infrastructure ETF?
XOP targets upstream drillers with a 0.35% expense ratio and 46.4% 1-year returns, while EMLP focuses on pipelines and utilities with a 2.8% dividend yield but deeper volatility.
The State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the First Trust North American Energy Infrastructure Fund (EMLP) are two distinct investment options in the energy sector. XOP focuses on upstream energy companies, such as drillers and refiners, while EMLP targets midstream infrastructure providers, including pipelines and utilities.
When comparing the two funds, investors should consider their investment objectives and risk tolerance. XOP offers low-cost exposure to the upstream energy sector, which may be attractive for those seeking broad, targeted energy exposure at a relatively low expense ratio. In contrast, EMLP provides a higher yield, making it an attractive option for income-focused investors.
Beta measures the volatility of a fund's price relative to the S&P 500. A beta of 1 indicates that the fund's price moves in line with the market, while a beta greater than 1 suggests higher volatility. As of the latest data, XOP has a beta of 1.15, indicating that it tends to be slightly more volatile than the overall market. EMLP, on the other hand, has a lower beta of 0.92, suggesting that it is slightly less volatile than the market.
Over the past year, XOP has delivered a total return of 17.2%, while EMLP has generated a higher total return of 27.4%. This difference in performance can be attributed to the distinct mandates of the two funds. XOP's focus on upstream energy companies may have been impacted by fluctuations in oil prices and production costs, while EMLP's utility-heavy infrastructure play has benefited from steady demand for energy transportation and processing services.
In terms of dividend yield, EMLP offers a trailing-12-month distribution yield of 3.7%, which is higher than XOP's yield of 2.1%. For income investors seeking regular income from their investments, EMLP's higher yield may be an appealing feature.
Ultimately, the decision between XOP and EMLP will depend on an investor's specific goals and risk preferences. Those seeking broad, low-cost exposure to the upstream energy sector may find XOP to be a suitable choice, while income-focused investors may prefer the higher yield and slightly lower volatility of EMLP.
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