Here is the situation. You want to get long oil. You also want to get long natural gas. You also want to get electricity. You don’t know what to do because you want to buy all of them but think that might be too much work.
Many investors have this issue. They like all of these different stocks in the same sector but they don’t want to go through all of the effort to buy each of the names they like. For these reasons, ETF’s were created to allow investors exposure to a broad range of companies typically in the same sector.
XLE is (get ready for this ) The Select Sector SPDR Trust – The Energy Select Sector SDPR Fund. What a mouth full. This allows investors a simple way to get exposure to all things energy while at the same time paying shareholders the XLE dividend!
We can see XLE is very correlated to the price of Chevron and oil but not so much Exxon. All good. Remember, XLE’s purpose is to give us broad exposure to the industry and sector.
XLE also happens to be a very popular ETF as it traded 14,243,909 shares today. With a current stock price of $69.80, the total notional stock traded today was almost one billion dollars ($994,224,848.20).
At the same time, XLE is trading mid-range currently, so investors and traders are able to have many trading opportunities ahead. Remember, there are many types of trades that are advantageous when stocks are mid-range.
The XLE Dividend
|Dividend Date||Type||Amount||Payment Date|
Here is a list of all line items broken out by each XLE dividend.
Again, this is how the XLE dividend happens:
- Ex-dividend days comes
- Dividend amount is removed from the stock price
- Stock price is reduced by the amount of dividend per share
- A few days later, shareholders receive dividend as a form of cash payment to their brokerage account
One thing that is the same between the XLE dividend and all other dividends is that the percentage payout fluctuates based on the price of the stock. Right now the XLE dividend is yielding 2.38%. That means if XLE does not move over the next year and we have 100 shares of this ETF, we will have received four dividend payments of $41.53 or a total of $166 over the entire year. This is the number that is equivalent to 2.38% of the stock which is currently priced for $69.80.
Is the XLE Dividend a Big Bonus?
No…it is not. At 2.38% yield for a stock that is mid range, it is not an extra incentive to go out and buy XLE. If XLE were to get to the lower end of its range two things would happen:
- XLE would become more attractive from the buy side for valuation reasons
- The XLE dividend rate would be much higher than 2.38%, giving us more of a cushion to the downside
Again, XLE is a very liquid ETF, so it should be on our radar at all times. If opportunity shows itself, we must be able to act quickly in XLE. Fortunately, it is a liquid enough product where we can do that.
However, if opportunity does not present iself, the XLE dividend rate is not high enough to have it be the sole reason to get exposure to XLE. We suggest waiting for XLE to get into the low end of its range (around $60) before looking to gain long exposure (and a higher dividend yield) to XLE.