Top 10 Consumer Staples ETFs

Our goal in this profile is to help investors wade through the many competing ETF offerings available. Using our long experience as an ETF publication, and nearly 40 years in the investment business, we can help select those ETFs that matter and may or may not be repetitive from one issuer to another. The result is a more manageable list of issues from which to view and make selections.

There is currently an expanding list of 20 ETFs oriented to the consumer staples sector with more on the way. The following analysis features a fair representation of ETFs available. We believe from these investors may choose an appropriate ETF to satisfy the best index-based offerings individuals and financial advisors may utilize.

We're not ranking these ETFs favoring one over another so don't let the listing order mislead you. Although we may use some of these in ETF Digest portfolios it's not our intention to recommend one over another.

ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones, Wisdom Tree, PowerShares, EG Shares and so forth. Also included are some so-called "enhanced" indexes that attempt to achieve better performance through more active management of the index.

Where competitive issues exist and/or repetitive issues available at a fee cost saving we mention those as other choices. New issues are coming to market consistently (especially globally) and sometimes these issues will need to become more seasoned before they may be included at least in our listings.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

XLP (SPDR Consumer Staples Select Sector ETF) covers the Consumer Staples Select Sector Index which includes food and staples retailing, household products, beverages, tobacco and personal products. The fund was launched in December 1998. The expense ratio is .20%. AUM (Assets under Management) equal $4.1 billion with average daily trading volume of 8.5M shares.

As of late July 2011 the annual dividend was $.66 making the current yield 2.05% and YTD return 7.60%.

For traders and investors wishing to hedge, leveraged and inverse issues are available closely matching XLP's performance to utilize from ProShares and Direxion Shares.

Data as of July

XLP Top Ten Holdings & Weightings

  1. Procter & Gamble Company (PG):  14.27%
  2. Philip Morris International, Inc. (PM):  9.55%
  3. Wal-Mart Stores, Inc. (WMT):  8.16%
  4. Coca-Cola Company (KO):  7.26%
  5. Kraft Foods Inc (KFT):  4.98%
  6. CVS Caremark Corp (CVS):  4.59%
  7. PepsiCo, Inc. (PEP):  4.50%
  8. Altria Group Inc. (MO):  4.45%
  9. Colgate-Palmolive Company (CL):  3.75%
  10. Walgreen Company (WAG):  3.31%

VDC (Vanguard Consumer Staples ETF) follows the MSCI US Investable Market Consumer Staples 25/50 Index covering the entire spectrum of food, personal products, tobacco, beverage, drug stores and mega centers. The fund was launched in January 2004. The expense ratio is .25%. AUM equal $760 billion and average daily trading volume is 63K shares. As of late July 2011 the annual dividend was $1.91 making the current yield 2.35% and YTD return 10%.

Data as of July 2011

VDC Top Ten Holdings & Weightings

  1. Procter & Gamble Company (PG):  12.43%
  2. Coca-Cola Company (KO):  9.80%
  3. Philip Morris International, Inc. (PM):  8.28%
  4. Wal-Mart Stores, Inc. (WMT):  7.20%
  5. PepsiCo, Inc. (PEP):  7.02%
  6. Kraft Foods, Inc. (KFT):  4.16%
  7. Altria Group Inc. (MO):  4.12%
  8. CVS Caremark Corp (CVS):  3.59%
  9. Colgate-Palmolive Company (CL):  3.01%
  10. Walgreen Company (WAG):  2.87%

IYK (iShares DJ U.S. Consumer Goods ETF) follows the Dow Jones U.S. Consumer Goods Index. The fund was launched in June 2006. The expense ratio is .48%. AUM equal $348 million and average daily trading volume is 56K shares. As of late July 2011 the annual dividend was $1.33 making the current yield 1.90% and YTD return of 7.60%.

An alternative choice is FCD (FocusShares Morningstar Consumer Defensive ETF) which is a venture of Scottrade and Morningstar featuring a lower expense ratio (.19%) and no trading commissions for Scottrade customers. You'll no doubt see something similar coming from Schwab soon enough.

Data as of July 2011

IYK Top Ten Holdings & Weightings

  1. Procter & Gamble Company (PG):  12.14%
  2. Coca-Cola Company (KO):  9.77%
  3. Philip Morris International, Inc. (PM):  8.10%
  4. PepsiCo, Inc. (PEP):  7.64%
  5. Kraft Foods Inc (KFT):  3.89%
  6. Altria Group Inc. (MO):  3.75%
  7. Ford Motor Co (F):  3.51%
  8. Colgate-Palmolive Company (CL):  2.94%
  9. Monsanto Company (MON):  2.68%
  10. Johnson Controls, Inc. (JCI):  1.91%

  

PSL (PowerShares Dynamic Consumer Staples ETF) follows the Dynamic Consumer Staples Sector Intellidex Index which is considered an "enhanced" index since it uses proprietary quantitative analysis to more actively deploy and manage constituents. Of some interest is the more even weightings of the holdings versus others already listed. The fund was launched in October 2010. The expense ratio is .60%. AUM equal $42 million with average daily trading volume of 4.5K shares. As of late July 2011 the annual dividend was $.24 making the current yield .74% and YTD return over 11%.

Another choice from the same sponsor is PSCC (PowerShares SmallCap Consumer Staples ETF) which follows the S&P SmallCap 600 Consumer Staples Index. The fund was launched in April 2010. Its expense ratio is .29%. AUM equal $13 million and average daily trading volume is 10K shares. As of late July 2011 the yield was just under 3% and YTD return 9.50%

Data as of July 2011

PSL Top Ten Holdings & Weightings

  1. CVS Caremark Corp (CVS):  2.66%
  2. Reynolds American Inc (RAI):  2.65%
  3. Philip Morris International, Inc. (PM):  2.61%
  4. Altria Group Inc. (MO):  2.55%
  5. Costco Wholesale Corporation (COST):  2.54%
  6. Colgate-Palmolive Company (CL):  2.53%
  7. PepsiCo, Inc. (PEP):  2.53%
  8. Estee Lauder Companies A (EL):  2.50%
  9. Kellogg Company (K):  2.43%
  10. General Mills, Inc. (GIS):  2.42%

 

FXG (First Trust Consumer Staples ETF) follows the StrataQuant Consumer Staples Index which is another "enhanced" index which employs the AlphaDEX stock selection methodology to select consumer staples stocks from the Russell 1000. The fund was launched in May 2007. AUM equal $267 million with average daily trading volume of 152K shares. As of late July 2011 the annual dividend was $.25 making the current yield just over 1% and YTD return of 19.50%.

Data as of July 2011

FXG Top Ten Holdings & Weightings

  1. Herbalife, Ltd. (HLF):  6.04%
  2. Green Mountain Coffee Roasters, Inc. (GMCR):  5.56%
  3. Dean Foods Company (DF):  4.85%
  4. Bunge, Ltd. (BG):  4.49%
  5. Ralcorp Holdings, Inc. (RAH):  4.49%
  6. Tyson Foods, Inc. A (TSN):  4.33%
  7. Whole Foods Market, Inc. (WFM):  4.05%
  8. CVS Caremark Corp (CVS):  3.94%
  9. Archer-Daniels Midland Company (ADM):  3.93%
  10. Smithfield Foods, Inc. (SFD):  3.80%

KXI (iShares S&P Global Consumer Staples ETF) follows the S&P Global Consumer Staples Index which includes the U.S. and other nation's consumer staples issues. The fund was launched in September 2006. The expense ratio is .48%. AUM equal $372 million and average daily trading volume is 36K shares. As of late July 2011 the annual dividend was $1.28 making the current yield 1.91% and YTD return 6.52%.

Data as of July 2011

KXI Top Ten Holdings & Weightings

  1. Nestle SA (NESN):  8.54%
  2. Procter & Gamble Company (PG):  7.03%
  3. Coca-Cola Company (KO):  6.12%
  4. Philip Morris International, Inc. (PM):  4.74%
  5. PepsiCo, Inc. (PEP):  4.42%
  6. Wal-Mart Stores, Inc. (WMT):  4.02%
  7. British American Tobacco PLC (BATS):  3.46%
  8. Kraft Foods Inc (KFT):  2.46%
  9. Unilever NV (UNA):  2.26%
  10. Altria Group Inc. (MO):  2.20%

RHS (Rydex S&P Equal Weight Consumer Staples ETF) follows the S&P Equal Weight Consumer Staples Index which as the name implies just breaks down the same sector ETF as XLP into equal weights. The fund was launched in November 2006. The expense ratio is .50%. AUM equal $25 million with average daily trading volume of 7.3K shares. The fund has struggled from a marketing perspective given company ownership changes which left it adrift for a period. This could now change with new ownership. As of late July 2011 the annual dividend was $.91 making the current yield 1.44% and YTD return 10.75%.

Data as of July 2011

RHS Top Ten Holdings & Weightings

  1. Whole Foods Market, Inc. (WFM):  2.72%
  2. Supervalu Inc. (SVU):  2.61%
  3. Estee Lauder Companies A (EL):  2.58%
  4. Tyson Foods, Inc. A (TSN):  2.56%
  5. ConAgra Foods, Inc. (CAG):  2.51%
  6. Mead Johnson Nutrition Company (MJN):  2.50%
  7. Dr Pepper Snapple Group, Inc. (DPS):  2.49%
  8. The Kroger Co (KR):  2.48%
  9. Safeway Inc. (SWY):  2.48%
  10. Hormel Foods Corporation (HRL):  2.46%

PBJ (PowerShares Dynamic Food & Beverage ETF) follows the Dynamic Food & Beverage Intellidex Index which another "enhanced" index from PowerShares that is more active in using quantitative analysis to select and manage the index. The fund was launched in June 2005. The expense ratio is .60%. AUM equal $290 million and average daily trading volume is 180K shares. As of late July 2011 the annual dividend yield was $.46 making the current yield 2.24% and YTD return 11.74%.

Data as of July 2011

PBJ Top Ten Holdings & Weightings

  1. Starbucks Corporation (SBUX):  5.14%
  2. PepsiCo, Inc. (PEP):  5.07%
  3. Mead Johnson Nutrition Company (MJN):  5.07%
  4. Yum Brands, Inc. (YUM):  5.02%
  5. H.J. Heinz Company (HNZ):  4.98%
  6. McDonald's Corporation (MCD):  4.97%
  7. General Mills, Inc. (GIS):  4.86%
  8. Coca-Cola Company (KO):  4.71%
  9. Darling International, Inc. (DAR):  3.36%
  10. Krispy Kreme Doughnut Corporation (KKD):  3.27%

ECON (EG Shares DJ Emerging Market Consumer ETF) follows the Dow Jones Emerging Markets Titans Index which is a market cap weighted index of the 30 leading emerging market companies in both consumer goods and services.  The fund was launched in September 2010. The expense ratio is .85%. AUM equal $225 million and average daily trading volume is 83K shares. As of late July 2011 the annual dividend was $.02 making the current yield negligible and YTD return 2.79%.

Data as of July 2011

ECON Top Ten Holdings & Weightings

  1. AmBev ADR (ABV):  10.30%
  2. Wal-Mart De Mexico SAB de CV (WALMEX V):  6.93%
  3. Naspers, Ltd. (NPN):  6.09%
  4. Astra International Tbk:  5.94%
  5. ITC Ltd. (500875):  5.75%
  6. Grupo Televisa SA (TLEVISA CP): 5.56%
  7. Fomento Económico Mexicano, S.A.B. De C.V. (FEMSA UBD):  4.82%
  8. Falabella Sociedad Anomina Comercial E Industrial:  4.63%
  9. BRF - Brasil Foods SA ADR (BRFS):  4.62%
  10. Cencosud SA:  4.26%

IPS (SPDR S&P International Consumer Staples ETF) follows the S&P Developed ex-U.S. BMI Consumer Staples Sector Index which represents non-U.S. consumer staples companies with market capitalizations of at least $100 million. The fund was launched in July 2008. The expense ratio is .50%. AUM equal $19 million and average daily trading volume is just under 10K shares. As of late July 2011 the annual dividend was $.67 making the current yield 2.05% and YTD return 5.27%.

Data as of July 2011

IPS Top Ten Holdings & Weightings

  1. Nestle SA (NESN):  16.28%
  2. British American Tobacco PLC (BATS):  6.21%
  3. Unilever NV (UNA):  4.29%
  4. Diageo PLC (DGE):  3.95%
  5. Tesco PLC (TSCO):  3.75%
  6. Danone (BN):  3.74%
  7. Anheuser-Busch InBev SA (AHBIF):  3.48%
  8. Unilever PLC (ULVR):  3.42%
  9. Wesfarmers Limited (WES):  3.39%
  10. Woolworths Limited (WOW):  3.29%

The consumer staples sector has enjoyed a positive first half of 2011 particularly as it remains a defensive sector for investors when markets became more volatile and difficult. Internationally an expanding consumer sector marked by positive demographics has and will help this sector expand.  

There is a lot to choose from in terms of indexes linked to ETFs. Some are passive and duplicative relatively. It's essential to remember it's really a game of battleship for sponsors seeking to be first to a sector space or just being competitive in the space. This is their business interest apart from your investment interest. You should always ignore their interests and align your choices with what serves your objectives best.

Investors should note that in a rising market particularly ETFs linked to enhanced issues will tend to outperform conventional index linked issues. I've not done enough analysis to determine their relative performance during down market periods.

New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned. 

For further information about portfolio structures using this or other ETFs see www.etfdigest.com .

You may address any feedback to: feedback@etfdigest.com   

 

(Source for holding data is from ETF Database and from various sponsors.)

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

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