Understanding the State Street Communication Services Select Sector SPDR ETF (XLC)

The State Street(R) Communication Services Select Sector SPDR(R) ETF (ticker: XLC) is designed to track the performance of companies within the communication services sector. This includes businesses involved in internet services, entertainment, and telecommunications.

What this ETF is trying to do

XLC focuses on a specific group of companies that provide communication tools and media content. By holding these different companies in one fund, it allows investors to gain exposure to the communication services industry.

What the numbers show

The data shows different ways to look at how the fund has performed. It is important to distinguish between price return (the change in the share price) and total return (which includes dividends).

• Year-to-Date (YTD): The YTD price return is approximately -5.33%. The YTD total return is approximately -4.47%.

• One-Year: The one-year price return was approximately -1.20%. However, the one-year total return was positive at approximately 0.02%.

• Three-Year: Over the last three years, the price return was approximately 64.31%, while the total return was higher at approximately 70.04%.

• Five-Year: The five-year total return is approximately 48.68%.

The current price of the ETF is $111.45. An estimated price from roughly one year ago was approximately $112.80.

Income and distribution explanation

XLC provides some level of cash income through distributions. The distribution yield is approximately 1.24%. This number describes the cash paid out relative to the ETF's price.

The fund usually pays distributions on a quarterly basis, having made 4 payments over the last 12 months. It is important to remember that a distribution yield is not the same as total return.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

However, the fund's erosion-risk score is 94, which is labeled as "Stable / sideways" with a "good" severity rating. There is no severe erosion-risk flag for this ETF.

Top Holdings

The following are the top holdings in the portfolio (note that this list is partial):

• Meta Platforms Inc Class A: 23.11%

• Alphabet Inc Class A: 12.43%

• Alphabet Inc Class C: 9.98%

• The Walt Disney Co: 4.70%

• AT&T Inc: 4.54%

• Take-Two Interactive Software Inc: 4.51%

• T-Mobile US Inc: 4.41%

• AppLovin Corp Ordinary Shares Class A: 4.31%

• Verizon Communications Inc: 4.30%

• Netflix Inc: 4.28%

*Holdings can change over time.*

Pros

• Strong Long-Term Growth: The three-year total return has been quite high at approximately 70.04%.

• Stable Risk Profile: The erosion-risk score suggests the price trend has been relatively stable or sideways.

Cons

• Recent Price Declines: The year-to-date price return has been negative.

• Concentration: A large portion of the fund is held in a few specific companies, such as Meta and Alphabet.

Beginner takeaway

XLC provides exposure to the communication services sector. While recent year-to-date numbers show a decline in share price, the long-term three-year total returns have been positive. Investors should remember that while the fund pays a distribution, the yield is relatively low compared to some other types of income funds.