This Global Energy ETF Could Be Ready to Take Off

Here’s one energy ETF I think is worth looking at for investors looking for both yield and upside tied to the rise in energy prices right now.

Dots over the earth connecting the world

Image source: Getty Images.

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Heading into 2022, energy stocks and ETFs were actually popular bets. Indeed, this sector has been among the best-performing groups this year. Due to a number of macro drivers that may have been unanticipated, energy ETFs have become somehow popular among investors. Go figure.

One energy ETF I’ve had my eye on for some time is iShares Global Energy ETF (TSX:IXC). That’s because this is an ETF providing investors with an impressive yield of 3%. But it’s also because I think this bull market in energy may not be over.

Let’s dive into why investors may want to consider this ETF right now.

Decent exposure and a juicy dividend for this energy ETF 

iShares Global Energy ETF offers diversified exposure to an array of large-cap energy organizations globally. Approximately 59% of the fund’s holdings are domesticated in the United States, and the rest are in international markets, including Canada.

Energy prices are seeing support from diminished supplies, a drawdown in inventories and improving global demand. Generally, large-cap global energy firms boast considerable free cash flow and solid balance sheets. Also, they have become more disciplined with capital management processes. Accordingly, it is worth noting that valuations in the energy segment continue to seem lucrative in comparison to other sectors, despite a rather incredible run-up in valuations of late.

In fact, share prices in this sector have not kept up with increasing oil prices and earnings predictions. Despite rising rates, this is one sector of the economy that could outperform. Accordingly, with a dividend yield of more than 3% at the time of writing, this is a potentially lucrative ETF I’m considering right now.

A more diversified way to play trends in global energy

With a portfolio of dozens of globally focused energy-related companies, the IXC stock is a more diversified way to play the uptrend we’re seeing in energy demand.

This fund’s largest holdings are what many call the “big oil” giants. Despite being out of favour due to ESG concerns in recent years, many of these giants have cleaned up their act. Via investments in carbon-capture technology, and efforts to invest in clean energy, these oil giants aren’t the monsters investors generally thought of years ago.

Rather, many oil companies are focused on being the transition toward a greener future. With a geographically diversified footprint, many of the core holdings of this ETF provide global exposure to this trend. Indeed, this is one of the few trends I see as being truly global in nature, making this ETF perhaps the best way to play this secular growth catalyst.

Bottom line

ETFs are great for passive and active investors alike. For those looking for global energy exposure, this is one ETF I think is worthy of keeping on the radar right now.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Chris MacDonald has no position in any stocks mentioned in this article.

More on Investing

potted green plant grows up in arrow shape
Stocks for Beginners

1 Canadian Growth Stock That Could Double Your Money in an Economic Recovery

The market downturn is an opportunity to lock growth during the economic recovery. This stock is a blend of value,…

Read more »

Bank sign on traditional europe building facade
Investing

RRSP Investors: Here’s the Best Canadian Bank Stock for Your Buck

Bank of Montreal (TSX:BMO)(NYSE:BMO) stock is getting far too cheap to ignore after the latest spill in the big Canadian…

Read more »

analyze data
Dividend Stocks

2 Safe Dividend Stocks That Could Help You Fight Inflation

A dependable stream of passive income is one way to help offset rising inflation rates. Here are two top dividend…

Read more »

edit Person using calculator next to charts and graphs
Dividend Stocks

Stay Invested in a Recession: Increase Positions in 2 Value Stocks

The suggestion of market analysts is to increase positions in two value stocks if you want to stay invested amid…

Read more »

Diagonal chain made of zeros and ones. Cryptocurrency and mining.
Cryptocurrency

Is This the End for Crypto?

Bitcoin (CRYPTO:ETH) is in the midst of its worst crash in years. Is this the end?

Read more »

Business success with growing, rising charts and businessman in background
Investing

4 Growth Stocks That Could Make You RICH by 2030

Canadians should take advantage of discounted growth stocks like goeasy Ltd. (TSX:GSY) and others in this summer bear market.

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Dividend Stocks

3 Dividend Stocks to Buy as Inflation Surges in Canada

If you're worried about how surging inflation may impact your portfolio, here are three of the best dividend stocks to…

Read more »

You Should Know This
Dividend Stocks

High Inflation: The Good and the Bad for Canadians

Consider tucking away some of your long-term savings in quality dividend stocks like Brookfield Infrastructure in this correction.

Read more »