The Global Industry Classification Standard® (GICS®) assigns a company to a single business classification according to its principal business activity. This assignment uses quantitative and qualitative factors, including revenues, earnings, and market perception. The sector is the first level of the four-tiered, hierarchical industry classification system that includes 11 sectors, 24 industry groups, 69 industries, and 158 sub-industries.
Within the GICS framework, as outlined in Exhibit 1, Utilities companies include those that are primarily engaged in:
- Supplying electric, gas and water utilities;
- Operating as Independent Power Producers, Gas & Power Marketing & Trading Specialists, or Integrated Energy Merchants energy traders; and
- Generating and distributing electricity using renewable sources.
The S&P 500® Utilities comprises all companies in the S&P 500 that are assigned to the Utilities sector by GICS. Created in 1957, the S&P 500 was the first broad U.S. market-cap-weighted stock market index. Today, it is the basis of many listed and over-the-counter investment instruments.
The Utilities sector is the fourth smallest by capitalization of the 11 sectors in the S&P 500, representing 3.07% of the index as of June 30, 2020 (see Exhibit 2). This compares to 4.17% and 2.23% for the S&P MidCap 400® and S&P SmallCap 600®, respectively. Overall, the Utilities sector accounts for 2.95% of (and 71 securities within) the S&P Total Market Index; only the Energy and Materials sectors (2.63% and 2.69%, respectively) account for less, by index weight.
With a total float-adjusted market capitalization of USD 786.16 billion, the S&P 500 Utilities sector comprised 28 companies as of June 30, 2020. The two largest companies in the sector were NextEra Energy Inc (NEE) and Dominion Energy Inc (D), with float-adjusted market caps of USD 117.55 billion and USD 68.13 billion, respectively. There were no Utilities companies in the top 10 of the S&P 500—NextEra Energy Inc ranked as the 46th largest stock, representing 0.46% of the index. The mean market cap of S&P 500 Utilities stocks was USD 28.08 billion, the median market cap was USD 20.86 billion, and the lowest market cap was USD 7.95 billion.