Which Is the Better Energy ETF, VanEck's Nuclear-Focused NLR or State Street's XOP Targeting Oil and Gas?

The VanEck Uranium and Nuclear ETF (NYSEMKT:NLR) provides concentrated exposure to the nuclear fuel cycle and power generation, while the State Street SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) offers equal-weighted access to the broader American fossil fuel industry.

While both funds reside within the energy sector, they target fundamentally different fuel sources. The State Street fund tracks oil and gas producers, while the VanEck fund captures companies involved in uranium mining and nuclear power plants. Investors often compare them when weighing traditional hydrocarbons against zero-carbon baseload energy sources.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The VanEck Uranium and Nuclear ETF is the more expensive option with a 0.52% expense ratio compared to 0.35% for the State Street fund. However, income-seeking investors may find the VanEck fund more attractive as it currently provides a higher payout.

Performance & risk comparison

What's inside

The VanEck Uranium and Nuclear ETF allocates 48% to energy, 29% to utilities, and 19% to industrials. It holds 29 positions, and its largest positions include Constellation Energy Corp (NASDAQ:CEG) at 8.26%, Cameco Corp (NYSE:CCJ) at 8.04%, and Public Service Enterprise Group (NYSE:PEG) at 7.14%. It was launched in 2007. The VanEck Uranium and Nuclear ETF has paid $3.17 per share over the trailing 12 months, which on its recent ~$114.46 share price works out to a 2.9% yield.

The State Street SPDR S&P Oil & Gas Exploration & Production ETF is heavily concentrated in energy, with a 97% allocation to that sector and 3% in basic materials. It holds 51 positions, and its top holdings include PBF Energy Inc (NYSE:PBF) at 3.29%, Delek US Holdings (NYSE:DK) at 2.99%, and Par Pacific Holdings (NYSE:PARR) at 2.99%. It was launched in 2006. The State Street SPDR S&P Oil & Gas Exploration & Production ETF has paid $3.25 per share over the trailing 12 months, which on its recent ~$158.57 share price works out to a 2.0% yield.

For more guidance on ETF investing, check out the full guide at this link.

What this means for investors

The arrival of artificial intelligence fundamentally transformed the energy sector. Demand for electricity to power the growth of computer servers need for AI means that investing in energy stocks is a great way to capitalize on this trend. The VanEck Uranium and Nuclear ETF (NLR) and State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP) provide different approaches to energy production, and choosing which to invest in depends on the factors that are most important to you.

NLR’s holdings offer an alternative to fossil fuels in the form of nuclear power. This fund is for investors who support a shift to cleaner energy sources, or desire to gain exposure to the green energy transition. NLR can be appealing to income-oriented investors as well for its higher dividend yield, although its larger expense ratio eats into a portion of your returns. Note that this ETF is more volatile, as demonstrated by its bigger beta.

Because XOP focuses on companies involved in oil and gas exploration and production, its performance is closely tied to crude oil and natural gas prices. Consequently, it has seen an impressive increase in its one-year return due to the U.S. conflict in the Middle East. Over a five-year period, however, its performance has lagged NLR, demonstrating the growing global desire to move away from fossil fuels. This fund is for those who seek exposure to the oil and gas sectors. It offers a solid dividend at a lower expense ratio.

Robert Izquierdo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cameco and Constellation Energy. The Motley Fool recommends Delek US. The Motley Fool has a disclosure policy.