This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Consumer Staple ETFs Stay in the Black

NEW YORK ( TheStreet) -- Consumer staple ETFs have provided protection lately. While the S&P 500 lost 3.6% in the last three months, Consumer Staples Select Sector SPDR (XLP) returned 0.7%, according to Morningstar. Other ETFs that stayed in the black include Vanguard Consumer Staples (VDC) and Guggenheim S&P 500 Equal Weight Consumer Staples (RHS).

The strong showing was not surprising. Consumer stocks have long been steady performers. The sector includes companies that make beverages, food, household goods, and tobacco. Prominent consumer stocks include Procter & Gamble (PG), Coca-Cola (KO), and Kraft Foods (KFT).

Providing low-priced necessities, the companies tend to record reliable sales year after year. Consumer stocks have enjoyed a special appeal lately because they offer rich dividends, which investors crave at a time of skimpy bond yields. The Vanguard consumer ETF yields 2.80%, compared to a yield of 1.67% for the 10-year Treasury.

Though consumer stocks sometimes lag in bull markets, they excel in downturns. When the S&P 500 lost 37% in the turmoil of 2008, Consumer Staples SPDR ETF only fell 14.8%. Avoiding big losses in bear markets, the consumer ETFs have delivered solid long-term returns. While the S&P 500 lost 0.2% annually during the past five years, the SPDR ETF returned 7.4%. The Vanguard and Guggenheim funds each returned 7.3%.

After their strong performance of recent years, the consumer stocks are no longer screaming bargains. The SPDR fund has a price-earnings ratio of 17.7, compared to a multiple of 15.4 for the S&P 500. Still, the consumer sector is appealing, says Robert Goldsborough, a Morningstar ETF analyst, who recommends the SPDR ETF for cautious investors. "The fund can be a sound defensive holding," he says.

The SDPR ETF is the biggest in the field with $5.7 billion in assets. The fund charges an expense ratio of 0.18%. The Vanguard fund has $1 billion in assets and charges 0.19%.


Goldsborough argues that consumer stocks should continue delivering steady returns. The sector is full of dominant companies that can increase their sales at mid-single digit rates, he says. Even if sales in the U.S. and Europe stagnate, the companies could continue growing because of their expanding presence in the emerging markets. Companies such as Coca-Cola and Colgate-Palmolive (CL) have been spending heavily to reach eager consumers in Asia and Latin America. That has provided a big boost to earnings.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
XLP $46.34 -2.05%
RHS $103.83 -2.30%
VDC $121.09 -2.11%
AAPL $107.72 -4.47%
FB $87.23 -2.46%

Markets

Chart of I:DJI
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASDAQ 4,636.1050 -140.4030 -2.94%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs