7 Best Communication Services ETFs to Buy Today | Investing

Of the 11 Global Industry Classification Standard (GICS) sectors present in the S&P 500, communication services is among the most bifurcated.

Traditionally, the sector was associated with legacy telecommunications operators such as AT&T Inc. (ticker: T), Verizon Communications Inc. (VZ) and T-Mobile US Inc. (TMUS). These businesses require substantial capital expenditures to maintain their networks, while mature business models and lackluster growth prospects have historically encouraged an emphasis on dividends for shareholder return.

Over the past decade, however, the U.S. communication services sector has become increasingly technology dominated and growth oriented. Following a major GICS reclassification in 2018, the sector expanded to include Magnificent Seven members Meta Platforms Inc. (META) and Alphabet Inc. (GOOGL, GOOG). Other companies that investors might associate with consumer discretionary spending, such as Walt Disney Co. (DIS) and Netflix Inc. (NFLX), also fall within communication services.

The divide between traditional telecommunications operators and newer technology-driven competitors has also come under increasing pressure. Earlier this month, after Elon Musk disclosed ambitions for Space Exploration Technologies Corp. (SPCX) to become a major U.S. mobile carrier through its Starlink satellite network, shares of AT&T, Verizon and T-Mobile fell 9.8%, 8.7% and 13.3% intraday, respectively, erasing approximately $50 billion in combined market capitalization. Still, not all experts are bearish.

“One aspect that will be a challenge for SpaceX is that Verizon and competitors have long-term customer relationships and decades of infrastructure on the ground that won’t disappear overnight,” says Jeff Weniger, chief investment strategist at Corgi Invest. “Legacy telecom stocks also currently rank among the deepest value opportunities in the market on a forward earnings multiple and dividend yield basis.”

Communication services exchange-traded funds (ETFs) can therefore vary substantially depending on how their underlying indexes select and weight holdings. Some emphasize established providers and dividend income, while others concentrate heavily on technology-driven newcomers.

“Communication services is a broad and evolving sector shaped by continued technological change and shifting consumer preferences,” says Kathy Kellert, head of index equity product at Vanguard. “As new technologies and changing consumption patterns reshape how people communicate, access information and consume entertainment, we believe taking a broad, long-term approach can help investors avoid trying to predict which individual companies will ultimately emerge as winners.”

Here are seven of the best communication services ETFs to buy today:

Vanguard Communication Services ETF (VOX)

“With 111 stocks, VOX provides exposure to the U.S. communication services sector, spanning digital platforms, media, entertainment and telecommunications,” Kellert explains. “For investors seeking dedicated communication services exposure, VOX offers a low-cost, index-based way to access the sector broadly, with an expense ratio of 0.09%.” The ETF currently pays a 0.9% 30-day SEC yield.

VOX’s portfolio illustrates how much the communication services sector has evolved over the past decade. Interactive media and services companies now account for just over 50% of its holdings, reflecting the growing influence of digital platforms. By comparison, traditional cable and satellite providers represent just 2%, broadcasting companies 1.8% and wireless telecommunications 2.7%.

State Street Communication Services Select Sector SPDR ETF (XLC)

“XLC can serve as a straightforward way to express a broad sector view because it provides exposure to the communication services companies within the S&P 500,” says Matthew Bartolini, managing director and global head of research strategists at State Street Investment Management. Unlike VOX, XLC’s portfolio is deliberately limited to just 22 large-cap stocks screened for liquidity and earnings consistency.

However, XLC’s exclusive focus on blue-chip S&P 500 communication services stocks introduces a degree of concentration risk. For example, Meta accounts for 23% of the portfolio, while Alphabet’s Class A and Class C shares represent another 12% and 10%, respectively. XLC is slightly cheaper than VOX, charging a 0.08% expense ratio, and currently pays a 1.1% 30-day SEC yield.

State Street Communication Services Select Sector SPDR Premium Income ETF (XLCI)

“XLCI combines exposure to communication services companies with an options strategy designed to generate premium income,” Bartolini explains. “The trade-off is important, though: Selling covered calls can constrain some upside participation when the underlying exposure rises significantly.” The ETF charges a higher 0.35% expense ratio and currently pays an 11.8% annualized distribution yield.

XLCI may outperform XLC when communication services stocks experience elevated volatility but remain relatively range-bound. However, investors should also consider the tax implications of XLCI’s monthly distributions. Their final tax characterization, including any ordinary income, capital gains or return of capital, is generally determined after year-end and reported on Form 1099-DIV.

State Street SPDR S&P Telecom ETF (XTL)

“Rather than providing exposure to the entire communication services sector, XTL tracks an index derived from the telecommunications segment of the broader U.S. equity market beyond the S&P 500,” Bartolini explains. “That makes XTL potentially more appropriate for investors looking to express a specific thesis on telecoms rather than a broad communication services sector view.”

XTL currently holds 39 equally weighted stocks spanning four telecommunications sub-industries: alternative carriers, communications equipment, integrated telecommunications and wireless telecommunications. This approach reduces concentration in the largest telecom operators. The ETF charges a 0.35% expense ratio and currently pays a 0.5% 30-day SEC yield.

Invesco S&P 500 Equal Weight Communication Services ETF (RSPC)

Investors interested in XLC’s S&P 500-based communication services exposure but wary of its top-heavy, market-cap-weighted composition may find RSPC an appealing alternative. Although it charges a higher 0.4% expense ratio, RSPC equally weights its holdings and rebalances quarterly to maintain that allocation, reducing concentration in sector giants such as Meta and Alphabet.

“RSPC takes a different approach to communication services, using equal weighting to shift exposure away from the sector’s largest companies and toward smaller constituents,” explains Chris Dahlin, senior factor and core equity strategist at Invesco. “The result is a less concentrated portfolio with greater exposure to smaller, more cyclical companies that may offer additional growth potential.”

iShares Global Comm Services ETF (IXP)

The preceding communication services ETFs focus exclusively on U.S. stocks, which can limit diversification. Investors seeking international exposure can consider IXP, which offers a broader portfolio of 64 holdings spanning both developed and emerging-market countries. The ETF charges a 0.37% expense ratio and currently pays a 1.2% 30-day SEC yield with a semiannual distribution schedule.

However, U.S. companies still dominate the ETF, accounting for 71% of its assets. IXP remains market-cap weighted, resulting in substantial concentration in Meta Platforms and Alphabet, which together account for 45% of the portfolio. Nevertheless, international companies also have meaningful representation, including China’s Tencent Holdings Ltd. (HK: 0700), at 4.2%, and Japan’s Nintendo Co. Ltd. (OTC: NTDOY), at 1.6%.

Corgi Space & Satellite Communications ETF (DIPR)

Space represents one of the faster-growing areas of the communications industry, but weightings in broad, market-cap-weighted sector ETFs tend to be limited. DIPR offers more targeted exposure at a 0.35% expense ratio. Its portfolio spans satellite constellation operators, launch companies, satellite manufacturers, Earth observation and geospatial platforms, ground equipment and software.

This approach produces a portfolio substantially different from the preceding ETFs. SpaceX is currently the largest holding, at 15.5%, followed by aerospace and defense companies such as Lockheed Martin Corp. (LMT) and Rocket Lab Corp. (RKLB). Other holdings include Garmin Ltd. (GRMN), Viasat Inc. (VSAT), Iridium Communications Inc. (IRDM), EchoStar Corp. (ECHO) and AST SpaceMobile Inc. (ASTS).