Lower Fees, Higher Yield: Why XLE Tops XOP
Key Points
State Street Energy Select Sector SPDR ETF offers a lower expense ratio and higher dividend yield than State Street SPDR S&P Oil & Gas Exploration; Production ETF.
State Street Energy Select Sector SPDR ETF is highly concentrated in large-cap giants, while State Street SPDR S&P Oil & Gas Exploration Production ETF uses a modified equal-weight approach.
State Street Energy Select Sector SPDR ETF has historically demonstrated better risk-adjusted performance with lower maximum drawdowns and higher total returns over five years.
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Investors choosing between State Street Energy Select Sector SPDR ETF (NYSEMKT:XLE) and State Street SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) must weigh the cost of large-cap concentration against the higher fees of a broader, production-focused strategy.
Energy investing is rarely a monolith, and these two funds offer distinct ways to play the sector. While the Energy Select Sector fund tracks large-cap stalwarts from the S&P 500, the Oil & Gas Exploration fund provides a more targeted dive into the specific mechanics of fuel production and refining.
Snapshot (cost & size)
| Metric | XOP | XLE |
|---|---|---|
| Issuer | SPDR | SPDR |
| Share price | $194.89 (as of 2026-10-15) | $66.56 (as of 2026-10-15) |
| Expense ratio | 0.35% | 0.08% |
| 1-yr return (as of 2026-10-15) | 57.9% | 58.6% |
| Dividend yield | 1.6% | 2.2% |
| Beta | 0.62 | 0.46 |
| AUM | $4.4 billion | $44.2 billion |
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
The Energy Select Sector fund is the more affordable option, with an expense ratio of 0.08% compared to its peer's 0.35%. It also offers a higher payout, with a yield gap of 0.67% over the Oil & Gas Exploration fund.
Performance & risk comparison
| Metric | XOP | XLE |
|---|---|---|
| Max drawdown (5 yr) | (35.0%) | (26.1%) |
| Growth of $1,000 over 5 years (total return) | $2,089 | $2,769 |
The Energy Select Sector fund is composed entirely of companies in the energy sector, focusing on the largest firms in the S&P 500. Its largest positions include Exxonmobil Holdings (NYSE:XOM) at 23.87%, Chevron (NYSE:CVX) at 17.94%, and Conocophillips (NYSE:COP) at 7.05%. It manages 21 holdings in total. The fund was launched in 1998. State Street Energy Select Sector SPDR ETF has paid $1.52 per share over the trailing 12 months, which, on its recent ~$66.6 share price, works out to a 2.2% yield.
The State Street SPDR S&P Oil & Gas Exploration & Production ETF tracks an index that includes integrated oil and gas, refining, and exploration sub-industries. This fund covers 51 holdings, with its largest positions including Marathon Petroleum (NYSE:MPC) at 3.16%, Hf Sinclair (NYSE:DINO) at 3.05%, and Valero Energy (NYSE:VLO) at 3.02%. Its sector allocation consists of 96% energy and 3% basic materials. The fund was launched in 2006. State Street SPDR S&P Oil & Gas Exploration & Production ETF has paid $3.12 per share over the trailing 12 months, which, on its recent ~$194.9 share price, works out to a 1.6% yield.
For more guidance on ETF investing, check out the full guide at this link.
Which looks like the better buy
When comparing the State Street Energy Select Sector SPDR ETF (XLE) and the State Street SPDR S&P Oil & Gas Exploration & Production ETF (XOP), investors should consider several key factors. Let's see what they tell us about each fund.
First, we should examine each fund's strategy. XLE is a fund focused on the broader energy sector and integrated giants. Top holdings ExxonMobil and Chevron comprise over 40% of its assets. XOP, meanwhile, is focused on upstream exploration and production companies. Moreover, it uses an equal-weighting formula, so that each holding is typically about 2-3% of total assets.
Two other important factors are historical performance and income potential. Over the last five years, XLE has delivered a total return of 178%, equating to a fantastic compound annual growth rate (CAGR) of 22.7%. XOP, on the other hand, has delivered a total return of 106%, with a 15.6% CAGR. Both returns are excellent and beat the S&P 500 over the same period. Turning to income potential, XLE boasts a dividend yield of 2.2%, while XOP's is 1.6%, giving an edge to XLE for income-minded investors.
One final factor to weigh is cost. Here, XLE has a major advantage. Its expense ratio is 0.08%, while XOP's is 0.35%. For context, if a person were to buy $10,000 worth of each fund, they should expect to pay $8 per year in fees for their XLE shares but $35 per year for their XOP shares.
In summary, XLE and XOP are both energy ETFs, however, their strategies, costs, performance, and income potential vary significantly. For many investors, XLE will be more appealing given its lower costs, higher historical returns, and larger dividend yield.
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Jake Lerch has positions in ExxonMobil. The Motley Fool has positions in and recommends Chevron. The Motley Fool recommends ConocoPhillips. The Motley Fool has a disclosure policy.
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