Best Consumer Staple ETFs

We are going to look at some consumer staple ETFs. Not all of these ETFs offer the same strategy. Some of them are passive and track an index. Some use quantitative strategies like momentum and factor investing. Lastly, some offer market-cap weightings and others are more equal weighting ETFs. None of these ETFs are presented in any sort of ranking system, I’m simply showing the data and leaving it up to you to decide what looks good for your portfolio. As always, I recommend a tool like ETF overlap to see if any of these ETFs already overlap with your portfolio and by how much.

What are consumer staples?

Consumer staples are companies that sell essential goods. Food companies like Kellogg’s and General Mills. Proctor & Gamble and Kimberly-Clark are other examples of consumer staple companies. Johnson and Johnson is another big consumer staple company. Basically, without these companies, most of us would either starve, not have much to wear, or be seriously up the creek.

grocery store with fruit

Top 7 Consumer Staple ETF’s

  1. XLP
  2. VDC
  3. IYK
  4. FXG
  5. RHS
  6. PBJ
  7. PSL

Below is a quick summary of the data for each company. A more detailed analysis of each follows.

Summary for each Consumer Staple ETF

# of HoldingsAUMYieldExpense RatioAVG VolumeInception YearSpread
XLP3417.7B2.36%0.10%10.5M1998.01
VDC1027.7B2.18%0.10%182K2004.06
IYK541.8B1.96%0.39%92K2000.03
FXG42724M1.25%0.63%94K2007.06
RHS34712M2.27%0.40%38K2006.07
PBJ31366M0.89%0.63%67K2005.11
PSL41127M1.27%0.60%37572006.12
Consumer staple ETF’s

XLP – Consumer Staples Select Sector SPDR Fund

XLP is the largest consumer staples ETF, with over 17 Billion in Assets under management. It has 34 holdings and the lowest expense ratio of the group, only 0.10%. XLP follows the MSCI USA IMI Consumer Staple Index. Almost all of XLP’s holdings are large cap stocks. This is a market cap weighted ETF; therefore, 69% of the ETF is the top 10 holdings. Proctor & Gamble being one of the top holdings.

VDC – Vanguard Consumer Staples Index Fund ETF

VDC is the 2nd largest ETF on our list. This ETF has the largest number of holdings on the list, 102. Likewise, it follows the same Index as XLP. 61% of its holdings are the top 10 stocks. With this ETF, you do get a little bit of exposure besides large cap. 8% Mid-cap and 4% small cap.

IYK – IShares US Consumer Staples ETF

IYK has 54 holdings and is one of the older ETFs on the list. It’s been around since 2000. FYI, this ETF has fared quite well in 2022 (4.11% YTD as of 12/23/22, the 2nd best performance on the list). Speaking of performance, the 10 year return of this ETF is 12.74% annualized. That’s the best in class. Like XLP, this is another ETF geared for large cap stocks; 95% of the stocks are large-cap stocks. Proctor & Gamble makes up 16% of this ETF and Pepsi makes up 11%. So, if you don’t like either of those companies, probably time to move along 🙂

FXG – First Trust Consumer Staples AlphaDEX ETF

We are finally getting into some ETFs that use different strategies. FXG is characterized by the use of multi-factor investing and tiered equal weighting. So, with that said, 42% of the ETF is concentrated in the top 10 holdings. This is much less than the typical 60% from the previous ones. You have 64% Large Cap and 36% Mid Cap; this gives you a bit broader market exposure than the previous ETFs. On the other hand, when you have a more complex strategy, this usually comes with a higher expense ratio. FXG ties for the highest expense ratio on our list. Over the last 10 years, that hasn’t led to outperformance of IYK; however, it does have the 3rd best performance on the list.

RHS – Invesco Equal Weighted ETF

RHS is one I’ve looked at a good bit, but still haven’t purchased myself. I’m not sure if it has a place in my portfolio or not. It offers the 2nd highest dividend yield (Currently 2.27%). However, it does have the 2nd lowest trading volume of the ETFs. It’s been around since 2006, so maybe that isn’t particularly worrisome? Since this is an EQUAL WEIGHT ETF, only 31% of it’s holdings are concentrated in the top 10%. However, 94% of the stocks are large cap. So, this is an ETF if you prefer equal weight holdings but still want mostly large-cap stocks.

PBJ Invesco Dynamic Food & Beverage ETF

I must say, this is the best ticker symbol of the bunch! PBJ uses multi-factor quantitative investing methods. Using momentum and value as factors. Once again, this is why it has a higher expense ratio. PBJ does have the least amount of holdings of the bunch, only 31. So, this is a play if you feel confident in it’s particular stocks. Out of all the ETFs, this one is the most balanced from a market cap perspective. 54% Large cap, 27% Mid Cap, and 20% Small Cap. 46% of it’s holdings are concentrated in the top 10 stocks.

PSL Invesco DWA Consumer Staples Momentum ETF

PSL is another factor investing ETF. It uses the Dorsey-Wright technical leaders index and narrows down the stock to 30 picks. The stocks with the highest momentum have the greatest weighting in the ETF. It gets re-balanced quarterly. For the year 2022, this ETF has fared the worst (Currently down 6.08% YTD). Lastly, it has the highest spread of the bunch- 0.12. Market cap weighting is balanced: 50% Large Cap, 29% Mid Cap, and 21% Small Cap.

PSL has the least amount of assets under management (only 127 Million). It has the second highest expense ratio and largest spread.

ESG investing for Consumer Staple ETFs

I realized not everyone cares about ESG investing, hence why I am putting this at the bottom. However, here is some data for those who do. All of my data comes from the Fossil Fuel Free website.

PBJ is the only ETF that scores an A on the tobacco score. Not only that, but the rest score below a D. I’m assuming this is because it doesn’t hold any tobacco companies. FXG and PSL both scored a C on the deforestation score. The rest of the group had a B or higher. Other than that, these ETFs scored an A or B on all of the other portions (Fossil Fuels, Prison Complex, Social Equality, etc).

Final Words

As always, I’m not a financial advisor, please consult a professional. This is only hear to discuss the data from a neutral viewpoint and allow the investor to make his or her own decisions. This is particularly the case because no one knows what you already hold in your own portfolio or what your goals are; hence why a professional that can offer 1 on 1 advice is always best!

Perhaps check out my article on low beta stocks; many consumer staple stocks are low beta stocks.

WISHING YOU THE BEST WITH YOUR INVESTING

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