In theory, the current environment should be unfavorable for small-cap utilities stocks and the exchange-traded funds (ETFs) tracking such companies. Broader small-cap indexes are lagging, and the utilities sector is often vulnerable to rising interest rates. The Federal Reserve raised borrowing costs in March, and many market observers believe that more rate hikes are on the way this year. Still, the PowerShares S&P SmallCap Utilities Portfolio (PSCU) is up about 6.5 percent year to date and was one of just four ETFs to hit all-time highs on Monday. PSCU is barely trailing the Utilities Select Sector SPDR (XLU), the ETF of which PSCU is the small-cap competitor.

PSCU, which celebrated its seventh birthday last week, follows the S&P SmallCap 600 Capped Utilities & Telecom Services Index, the utilities offshoot of the widely followed S&P SmallCap 600 Index. Most U.S. utilities do not fit the definition of small cap. For example, the Russell 2000 Index allocates just 3.7 percent of its weight to utilities stocks -- for comparison, health care stocks are almost 13 percent of the gauge -- while the S&P SmallCap 600 devotes a mere 2.7 percent of its lineup to utilities. (See also: PowerShares S&P SmallCap Utilities ETF.)

As a result, PSCU is not a large ETF in terms of its number of holdings. Home to just 16 stocks, PSCU is comparatively small versus other sector ETFs. One result of PSCU's small roster is some concentration. The ETF's top three holdings – Allete, Inc. (ALE), Spire Inc. (SR) and South Jersey Industries, Inc. (SJI) – combine for almost 41 percent of PSCU's weight. None of the ETF's other 13 holdings command weights of more than 8 percent. (See also: An Introduction to Sector ETFs.)

Small caps, regardless of sector, usually feature lower dividend yields than their large-cap counterparts, and that is the case with PSCU when measured against XLU. PSCU's trailing-12-month dividend yield of 2.98 percent is well above what investors will find on broader small-cap benchmarks such as the Russell 2000 and the S&P SmallCap 600, but that yield is still below the 3.5 percent found on XLU.

Another issue for investors to mull before committing to PSCU is risk-adjusted performance. While PSCU is performing nearly in line with XLU this year, the small-cap utilities ETF has been almost 400 basis points more volatile. Interestingly, that scenario reverses over some longer holding periods. PSCU has been slightly less volatile than XLU over the past three years, a period in which PSCU has returned almost 61 percent compared to 36 percent for XLU. Since inception, PSCU has slightly trailed the S&P SmallCap 600 Index, according to PowerShares data. (See also: Top 3 Small-Cap ETFs for 2017.)