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.

Consumer Staples are considered as a more defensive and conservative sector due to the essential needs people have for basic goods as noted in the image above. When markets become more volatile, this sector should offer superior relative performance and stability. When markets are trending strongly higher, it's not unusual for the sector to lag while still offering positive returns.  

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.

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.

We rank the top 10 ETF by our proprietary stars system as outlined below. If an ETF you're interested in is not included but you'd like to know a ranking send an inquiry to support@ETFDigest.com and we'll attempt to satisfy your interest.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity


Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach. Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

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.

 

#1: SPDR Consumer Staples Select ETF (XLP)

XLP 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.

 

XLP Top Ten Holdings & Weightings
Data as of November, 2011
  1. The Procter & Gamble Co (PG): 14.32%
  2. Philip Morris International, Inc. (PM): 9.99%
  3. Wal-Mart Stores Inc (WMT): 8.12%
  4. The Coca-Cola Co (KO): 7.48%
  5. Kraft Foods Inc (KFT): 5.06%
  6. Altria Group Inc. (MO): 4.65%
  7. CVS Caremark Corp (CVS): 4.45%
  8. PepsiCo Inc (PEP): 4.08%
  9. Colgate-Palmolive Company (CL): 3.91%
  10. Costco Wholesale Corporation (COST): 3.30%

 

#2: Vanguard Consumer Staples ETF (VDC)

 

VDC 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 $802 million and average daily trading volume is 79K shares. As end of November 2011 the annual dividend yield was 2.47% and YTD return 5.42%.

VDC Top Ten Holdings

Data as of November, 2011
  1. The Procter & Gamble Co (PG): 12.36%
  2. The Coca-Cola Co (KO): 9.48%
  3. Philip Morris International, Inc. (PM): 8.13%
  4. PepsiCo Inc (PEP): 7.51%
  5. Wal-Mart Stores Inc (WMT): 7.01%
  6. Kraft Foods Inc (KFT): 4.31%
  7. Altria Group Inc. (MO): 3.99%
  8. CVS Caremark Corp (CVS): 3.75%
  9. Colgate-Palmolive Company (CL): 3.10%
  10. Walgreen Company (WAG): 2.90%

#3: iShares Dow Jones U.S. Consumer Goods Sector ETF (IYK)

IYK follows the Dow Jones U.S. Consumer Goods Index. The fund was launched in June 2006. The expense ratio is .48%. AUM equal $336 million and average daily trading volume is 71K shares. As of the end of November 2011 the annual dividend yield was 2.20% and YTD return of .65%.

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.

IYK Top Ten Holdings & Weightings

Data as of November, 2011
  1. The Procter & Gamble Co (PG): 12.18%
  2. The Coca-Cola Co (KO): 10.07%
  3. Philip Morris International, Inc. (PM): 8.50%
  4. PepsiCo Inc (PEP): 6.94%
  5. Kraft Foods Inc (KFT): 3.99%
  6. Altria Group Inc. (MO): 3.97%
  7. Colgate-Palmolive Company (CL): 3.05%
  8. Ford Motor Co (F): 3.02%
  9. Monsanto Company (MON): 2.69%
  10. Nike, Inc. B (NKE): 2.52%

#4: First Trust Consumer Staples ETF (FXG)

 FXG 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 $184 million with average daily trading volume of 171K shares. As of the end of November 2011 the annual dividend yield was .82% and YTD return of 6.44%.

Note: I like the structure of enhanced index ETFs for the most part given their trait of demonstrating outperformance on the upside but underperformance on the downside. This makes for better trading opportunities using indicators like DeMark.  Of the "enhanced" indexes FXG seems to offer the best trading opportunities. The YTD rate of return in July was 19.50% but DeMark offered good trades to capture most of this return before markets turned over.

FXG Top Ten Holdings & Weightings

Data as of November, 2011
  1. Green Mountain Coffee Roasters, Inc. (GMCR): 5.55%
  2. Herbalife, Ltd. (HLF): 4.96%
  3. Tyson Foods, Inc. A (TSN): 4.77%
  4. Smithfield Foods, Inc. (SFD): 4.75%
  5. Hansen Natural Corporation (HANS): 4.60%
  6. Bunge Ltd (BG): 4.51%
  7. Whole Foods Market, Inc. (WFM): 4.39%
  8. Archer-Daniels Midland Company (ADM): 4.39%
  9. Hormel Foods Corporation (HRL): 3.87%
  10. Corn Products International, Inc. (CPO): 3.78%

#5: PowerShares Dynamic Consumer Staples ETF (PSL)

PSL 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 are the more even weightings of holdings versus others. The fund was launched in October 2010. The expense ratio is .60%. AUM equal $36 million with average daily trading volume of 3.7K shares. As of the end of November 2011 the annual dividend yield was 1.80% and YTD return was 1.1%.

Note: As above, I like the structure of enhanced index ETFs for the most part given outperformance on the upside but underperformance on the downside. This makes for better trading opportunities using indicators like DeMark; however, given the low AUM and trading volume achieving effective trades requires order entry precision and may be restrained by low trading volume.

PSL Top Ten Holdings & Weightings

Data as of November, 2011
  1. Costco Wholesale Corporation (COST): 2.73%
  2. Kimberly-Clark Corporation (KMB): 2.69%
  3. Reynolds American Inc (RAI): 2.63%
  4. Altria Group Inc. (MO): 2.62%
  5. The Procter & Gamble Co (PG): 2.60%
  6. Colgate-Palmolive Company (CL): 2.59%
  7. Kellogg Company (K): 2.57%
  8. Kraft Foods Inc (KFT): 2.54%
  9. The Coca-Cola Co (KO): 2.53%
  10. Wal-Mart Stores Inc (WMT): 2.52%

More from ETF Digest

#6: iShares S&P Global Consumer Staples ETF (KXI)

KXI 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 $430 million and average daily trading volume is 47K shares. As of the end of November 2011 the annual dividend yield was 2.41% and YTD return 1.62%.

 

KXI Top Ten Holdings & Weightings

Data as of November, 2011
  1. Nestle SA (NESN): 8.22%
  2. The Procter & Gamble Co (PG): 7.11%
  3. The Coca-Cola Co (KO): 6.36%
  4. Philip Morris International, Inc. (PM): 4.97%
  5. PepsiCo Inc (PEP): 4.04%
  6. Wal-Mart Stores Inc (WMT): 4.03%
  7. British American Tobacco PLC (BATS): 3.71%
  8. Kraft Foods Inc (KFT): 2.52%
  9. Unilever NV (UNA): 2.43%
  10. Altria Group Inc. (MO): 2.31%

#7: PowerShares Dynamic Food & Beverage Portfolio (PBJ)

PBJ 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 $187 million and average daily trading volume is 221K shares. As of the end of November 2011 the annual dividend yield was 1.042.24% and YTD return -1.39%. 11.74%.

Note: Here's another enhanced index ETF with good trading possibilities given outperformance on the upside and underperformance on the downside. To us this means more not less trading is necessary to maintain good gains. In June/July 2011 the fund was up 11.74% but current figures put it slightly negative. This could be prevented by following some DeMark Indicators as we suggest to premium members.

PBJ Top Ten Holdings & Weightings

Data as of November, 2011
  1. Mead Johnson Nutrition Company (MJN): 5.16%
  2. Kraft Foods Inc (KFT): 5.06%
  3. H.J. Heinz Company (HNZ): 5.05%
  4. The Coca-Cola Co (KO): 5.04%
  5. McDonald's Corporation (MCD): 4.99%
  6. The Kroger Co (KR): 4.95%
  7. Green Mountain Coffee Roasters, Inc. (GMCR): 4.85%
  8. Archer-Daniels Midland Company (ADM): 4.56%
  9. Fresh Market, Inc. (TFM): 3.21%
  10. Whole Foods Market, Inc. (WFM): 2.98%

#8: Rydex S&P Equal Weight Consumer Staples ETF (RHS)

RHS (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 $26 million with average daily trading volume of 10K shares. The fund has struggled from a marketing perspective given company ownership changes which left it adrift for a period. This should change given new more dynamic ownership. As of the end of November 2011 the annual dividend yield was 2.07% and YTD return 4.48%.

RHS Top Ten Holdings & Weightings

Data as of November, 2011
  1. Beam Inc (BEAM): 2.66%
  2. Tyson Foods, Inc. A (TSN): 2.60%
  3. Dean Foods Company (DF): 2.52%
  4. Safeway Inc. (SWY): 2.52%
  5. Wal-Mart Stores Inc (WMT): 2.51%
  6. Brown-Forman Corporation B (BF.B): 2.50%
  7. ConAgra Foods, Inc. (CAG): 2.49%
  8. Campbell Soup Co (CPB): 2.48%
  9. Hormel Foods Corporation (HRL): 2.47%
  10. Constellation Brands Inc. A (STZ): 2.47%

#9: SPDR S&P International Consumer Staples ETF (IPS)

 

IPS 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 $18 million and average daily trading volume is just under 15K shares. As of the end of November 2011 the annual dividend yield was 2.88% and YTD return -3.04%.

Note: Investors do wish to extend investments overseas but when economic and market conditions are poor at home and abroad they tend to retrench naturally. Therefore a sector such as this will need more time.

 

IPS Top Ten Holdings & Weightings

Data as of November, 2011
  1. Nestle SA (NESN): 15.96%
  2. British American Tobacco PLC (BATS): 6.82%
  3. Unilever NV (UNA): 4.72%
  4. Diageo PLC (DGE): 4.18%
  5. Tesco PLC (TSCO): 3.92%
  6. Unilever PLC (ULVR): 3.72%
  7. Danone (BN): 3.66%
  8. Wesfarmers Limited (WES): 3.63%
  9. Anheuser-Busch InBev SA (AHBIF): 3.50%
  10. Imperial Tobacco Group PLC (IMT): 3.07%

#10 EG Shares Emerging Markets Dividend ETF (ECON)

 

ECON 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 $234 million and average daily trading volume is 97K shares. As of the end of November 2011 the annual dividend yield was negligible and YTD return -12.31%.

Note: ECON is a relatively new issue in a promising focused on a promising sector in the world especially in terms of friendly demographics for consumers. However, as with other overseas markets when conditions at home and abroad are unsettled it's harder to get investors interested in more distant and exotic themes. More seasoning is needed along with stability.

ECON Top Ten Holdings

Data as of November, 2011
  1. Companhia de Bebidas das Americas Ambev ADR (ABV): 12.03%
  2. Astra International Tbk (ASII): 7.52%
  3. Wal - Mart de Mexico, S.A.B. de C.V. (WALMEX V): 7.38%
  4. BRF - Brasil Foods SA ADR (BRFS): 6.77%
  5. Fomento Económico Mexicano, S.A.B. De C.V. (FEMSA UBD): 5.96%
  6. Naspers Ltd (NPN): 5.67%
  7. Grupo Televisa, S.A. (TLEVISACPO): 5.63%
  8. S.A.C.I. Falabella (FALABELLA): 5.28%
  9. Cencosud SA (CENCOSUD): 4.82%
  10. Genting Berhad: 3.82%

This gives you a handy summary of U.S. and global consumer staple sectors from which to choose. We've tried to include a variety of popular issues along with a few more exotic offerings for your consideration. Once again, the sector generally is considered more defensive and conservative overall.

It's also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. 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 technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

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

The ETF Digest has no current positions in the featured ETFs.

(Source for data is from ETF sponsors and various ETF data providers)

 

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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