The Power Behind AI Pays a Dividend: 3 Utility ETFs Yielding Up to 2.77%

Data centers built for artificial intelligence are driving U.S. electricity demand higher, and three utility funds let income investors own the companies that supply that power: the State Street Utilities Select Sector SPDR ETF (NYSEARCA:XLU), the Fidelity MSCI Utilities Index ETF (NYSEARCA:FUTY) and the iShares U.S. Utilities ETF (NYSEARCA:IDU). As of November 9, 2026, their trailing yields range from 2.3% to 2.8%. Their one-year returns are much smoother than the AI headlines would suggest.

Why AI Data Centers Depend on Utilities

The U.S. Department of Energy projects that data centers will account for up to 12% of U.S. electrical demand by 2028, driven by AI development. The Government Accountability Office reported that projection in its study of space-based data centers.

Each site uses a huge amount of power, and that is what stresses the grid. Colorado Legislative Council Staff note that a single operating data center can consume over a gigawatt. The same Colorado Legislative Council Staff report says a gigawatt is enough to power approximately 750,000 homes.

Utility funds hold two kinds of power companies, and each makes money from that demand in its own way. Regulated utilities earn returns that state regulators set. More demand means more approved spending on plants and power lines, and earnings grow at a steady pace. Independent power producers sell electricity at market prices. When supply is tight, higher prices go straight to their profits, but their earnings are more volatile.

Constellation Energy (NASDAQ:CEG | CEG Price Prediction) shows what that direct exposure looks like. In its third-quarter 2026 earnings disclosure, it cited a 20-year, 690 MW power agreement with a cloud provider that supports investment at its Calvert Cliffs nuclear plant. It also cited a 20-year agreement with another tech giant tied to nuclear uprates, which add capacity to existing reactors.

Keep that in perspective. A utility fund gives you exposure to electricity demand, and AI is only one source of it. If you want to go further down the AI infrastructure chain, we featured seven suppliers behind the expansion, from power to cooling, in a free report you can grab here. The Colorado report also lists electric vehicle adoption, onshoring of manufacturing, and the electrification of industry and buildings.

XLU Offers the Most Liquid Route to Power Demand

XLU’s biggest advantage is its size. It tracks the utilities in the S&P 500 and reported $23.1 billion in net assets as of June 30, 2026, far more than FUTY. That size generally supports tight bid-ask spreads, which helps retirees who rebalance or sell shares to fund withdrawals.

As of June 30, 2026, NextEra Energy (NYSE:NEE) made up 13% of the fund, ahead of the next two utilities at 8% and 7%.

A rough quarter at NextEra therefore moves the whole fund. That concentration could grow, because NextEra’s pending combination with another top-ten holding is expected to close in the second half of 2027.

The merchant generators give XLU its most direct link to rising demand. On June 30, 2026, Constellation accounted for 6% of the fund, with two other merchant generators at 4% and 2%.

XLU’s trailing yield is 2.8%, and it made four distributions over the past year. Its fact sheet dated September 30, 2026, lists a gross expense ratio of 0.08%.

Over one year, it returned 2%, and over five years, 52%, with distributions reinvested. The main tradeoff is that the fund held only 31 S&P 500 members at that date, so smaller utilities are left out.

FUTY Reaches Into Small-Cap Nuclear and Water Names

FUTY tracks the MSCI USA IMI Utilities 25/50 Index, which adds mid-cap and small-cap utilities to the large caps. Its July 31, 2026, filing listed 64 positions and $2.3 billion in net assets.

The top of the portfolio looks a lot like XLU. As of July 31, 2026, NextEra made up 12% of the fund, Constellation 5%, and another merchant generator 3%.

The smaller holdings are where FUTY differs. A smaller merchant generator held about 0.9%. An early-stage nuclear company held 0.4%. Small water and gas utilities make up the rest.

FUTY’s trailing yield is 2.7%, and it also made four distributions over the trailing year. It returned 2% over one year and 50% over five years. But its small names carry tiny weights, so the large caps still drive results.

IDU Is the Overlooked Fund With the Best Past Year

IDU tracks the Russell 1000 Utilities RIC 22.5/45 Capped Index, which gets its stocks from the wider Russell 1000 instead of the S&P 500 alone. Its capping rules limit how much any single stock and the group of largest positions can count. Those limits keep the fund diversified enough to qualify for the tax treatment funds rely on.

IDU posted the strongest one-year return of the three at 3%, and it returned 52% over five years.

Its net expense ratio is 0.37%, according to its August 31, 2026, prospectus. Its trailing yield of 2.3% is the lowest of the group, paid in four distributions over the past year.

IDU’s index pulls from the same pool of large U.S. utilities, so expect it to overlap with the other two funds.

Why the AI Boom Skipped These Funds Last Year

The AI power story has not shown up in these funds’ returns over the past year. The three returned between 2% and 3%, with distributions reinvested.

The five-year record looks very different, with gains ranging from 50% to 52%. That period included swings in interest rates and growing demand for power from many sources, so no single cause explains the gains. Past returns do not forecast future ones.

Risks That Could Shrink Your Utility Income

Interest rates are the first hurdle. The 10-year Treasury yielded 4.8% in early November, more than any of these funds’ trailing yields. Utilities borrow heavily, so higher rates raise their financing costs and make their dividends less appealing next to bonds.

Meeting new demand also takes heavy spending on power plants and transmission lines. State regulators decide how much of that cost utilities can pass on to customers, and shareholders absorb whatever regulators turn down.

Customers already feel the strain. Citing the U.S. Energy Information Administration, the Colorado report notes that national retail electricity prices have increased faster than inflation since 2022. The independent market monitor for PJM Interconnection, the grid operator for much of the eastern U.S., concluded that “data center load growth is the primary reason” for tight capacity conditions and high prices on that grid. Rising bills could build political pressure against future rate increases. Distributions can also shrink, because none of these yields is fixed or guaranteed.

Which Utility ETF Fits Your Income Plan

XLU leads the group on the measures many retirees count most. It has the highest yield of the three, a stated 0.08% fee, and far more assets than FUTY. FUTY is a good fit for those seeking a bet in smaller utilities and early-stage nuclear companies without giving up much yield. IDU fits readers who prefer its capped Russell index and its stronger past year, and who can accept the lowest yield of the group. All three hold largely the same top companies, so owning more than one adds little diversification.

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