Utilities ETF FXU Hits 17% Annual Gain As Data Centers Reshape Power Demand

Data center electricity demand has turned utility stocks back into a growth story, and First Trust Utilities AlphaDEX Fund (NYSEARCA:FXU) has captured the move. FXU is up 17% over the past year and 7% year to date, with shares around $48. Income investors holding FXU collect a variable quarterly distribution that has trended higher with utility earnings, but the safety of that payout depends on whether the AI-driven power buildout actually shows up in operating cash flow, or whether rising fuel costs and Treasury yields squeeze it first.

How FXU Generates Its Income

FXU tracks the StrataQuant Utilities Index, an enhanced index that ranks Russell 1000 utility stocks on growth and value factors and then tier-weights the selections. The fund holds roughly 40 names, with top positions including Edison International at 5%, National Fuel Gas at 5%, Pinnacle West Capital at 4%, Eversource Energy at 4%, and UGI at 4%. Because AlphaDEX tilts toward higher-scoring names rather than the largest market caps, FXU carries more mid-cap utility and natural-gas distributor exposure than a cap-weighted sector fund.

Distributions are paid quarterly and come from dividends collected on those underlying holdings. The last four payments add up to roughly $1.05 per share, equating to a trailing yield near 2.2%. The distributions come straight from dividends paid by the underlying utilities, which matters when evaluating durability.

What Backs the Payout

The income pipeline rests on regulated rate base growth, and that growth is being supercharged by hyperscale data centers. Utility-sector value added reached $485.7 billion in Q4 2025, up from $454.4 billion a year earlier, with Q3 2025 posting 3.8% growth, the fastest in recent quarters. The Information sector, the demand source for AI compute, grew 2.5% in the same quarter, providing a direct line of sight to load growth that supports approved rate cases and dividend coverage.

Corporate profits in utilities tell a more cautious story. Sector profits were $54.9 billion in Q4 2025, down from $60.6 billion in Q3 and $65.3 billion a year prior. The dip reflects fuel-cost pressure as demand keeps climbing: WTI crude is at $102, sitting in the 94th percentile of its 12-month range and well above the $70 average. Utilities recover fuel costs through regulatory pass-throughs, but only with a lag, which can pinch reported earnings and slow dividend growth from holdings like UGI and National Fuel Gas.

The Rate Pressure Test

The 10-year Treasury yield is 4.5%, up 49 basis points since late February. That matters two ways: it raises the financing cost of the multi-year capex programs utilities need to electrify data centers, and it gives income buyers a competing 4.5% risk-free yield against FXU’s 2.2%. The fund’s case rests on dividend growth plus capital appreciation, and the -5% one-month pullback reflects exactly that valuation pressure.

Total Return and Verdict

Over five years FXU has returned 74% and over ten years 146%, so the income has been paired with real capital growth rather than NAV erosion. The Q1 2026 distribution of $0.229 came in above the $0.2105 paid in Q1 2025, continuing the underlying growth trend even as quarter-to-quarter amounts fluctuate with what portfolio companies declare.

The distribution looks sustainable. Regulated cash flows back the payout, data center demand is widening the rate base, and AlphaDEX’s value tilt keeps the fund out of the most expensive mega-cap utility names. The risks are real but manageable: elevated oil prices will compress near-term margins for gas-distribution holdings, and a 4.5% Treasury yield caps how much multiple expansion utilities can earn. Income-focused investors prioritizing headline yield may find higher-payout utility products more aligned with their goals. FXU’s profile fits a different mandate: utility income paired with a growth kicker tied to AI power demand.