Utility stocks are making a surprising impact in 2026, as evidenced by the Vanguard Utilities ETF (VPU), which has surged 8.3% year-to-date. This performance positions it as one of the top Vanguard ETFs, despite the sector comprising only 2.37% of the S&P 500. With a dividend yield of 2.56%, more than double that of the S&P 500, VPU is attracting income-focused investors, particularly in a climate of geopolitical uncertainty, such as the ongoing conflict in Iran.

The utility sector’s strong start is fueled by three transformative trends: the rise of artificial intelligence, the increasing adoption of electric vehicles, and a resurgence in manufacturing activity. These developments are driving significant demand for power, positioning utility stocks as both defensive and growth-oriented investments. Notably, data centers, which currently consume 3% of U.S. power, are expected to increase their share to 10% by 2030, further bolstering the sector’s growth potential.

For long-term investors, the Vanguard Utilities ETF offers a compelling combination of solid yield and low fees (0.09%), making it an attractive option in a shifting market landscape.

Source: fool.com