10 Best Consumer Staples ETFs
In this article, we discuss the 10 best consumer staples ETFs to invest in. If you want to skip our detailed introduction of the consumer staples industry and just want to take a look at some more ETFs, go directly to the 5 Best Consumer Staples ETFs.
Consumer staples are an integral part of the average person's daily life, encompassing essential items we depend on regularly. These include necessities like food and beverages, personal care items, household and cleaning products such as paper goods, as well as alcohol, tobacco, and cosmetics.
As previously mentioned in one of our articles, the consumer staples sector demonstrated remarkable performance in 2022, even in the face of elevated inflation. By December 9, 2022, the S&P Consumer Staples Select Sector index had achieved a gain of 0.37%, contrasting with the substantial 16.17% decline observed in the S&P 500, as reported earlier.
The purchase of consumer staples remains consistent regardless of the economic conditions, with a relatively stable quantity being bought during both prosperous and challenging times. For instance, the data presented by Hargreaves Lansdown reveals a compelling trend. During the height of the stock market's impact due to the coronavirus pandemic, the FTSE All Share Index experienced a substantial drop of 29.5% by March 18, 2020. In stark contrast, within the same timeframe, the consumer staples sector exhibited a significantly milder decline of just 13.24%, underscoring its resilience even in the face of significant market challenges. This sets the consumer staples sector apart from consumer discretionary enterprises like restaurants, hotels, and apparel, as well as consumer durables—durable goods such as furniture and electronics—that are more sensitive to market fluctuations. However, this stability often entails a trade-off, as significant explosive growth prospects are limited. This compromise is the inconspicuous price for enjoying stability during periods of uncertainty. Additionally, in the event of an economic upturn, other market sectors are poised to reap greater benefits compared to this particular industry.
Risk-averse investors looking to secure their investments against inflation can opt to increasing their exposure to the consumer staples sector by choosing consumer staples ETFs instead of investing in individual consumer staples stocks. A consumer staples ETF is an investment vehicle that focuses on consumer staples equities. ETFs have gained popularity over the years for several reasons. They offer diversification, allowing investors to access a range of stocks through a single investment, eliminating the need to purchase each stock separately. Furthermore, ETFs provide greater stability due to their lower volatility compared to individual stocks.
When it comes to discussing the consumer staples industry, it's worth examining the perspective of one of the global giants in the consumer staples sector, Walmart Inc. (NYSE:WMT), regarding the industry's prospects for the current year. As stated by its management:
These will again be a headwind in Q2 and to a lesser extent in Q3. As we lap these charges, we expect meaningful improvement in ROI in the back half of this year. When you look beyond these unique items, our underlying operational ROI is steadily moving higher. At our Investor Day in April, I said that we want our ROI to go up every year and I still believe that will be the case this year. Let me briefly reference key segment highlights for Q1. For Walmart U.S. comp sales were strong, up 7.4% reflecting higher store traffic trends as well as strong growth and store fulfilled pickup and delivery. From a category perspective, comp sales were driven by strong growth in food and health and wellness, partially offset by a decline in general merchandise sales.
Unseasonably cooler spring weather negatively impacted sales in certain seasonal hardline categories including lawn and garden. Gross margins decreased 41 basis points primarily due to ongoing pressure from category mix shifts. As mentioned previously, supply chain costs and transportation were lower as we lapped last year’s elevated levels. Inflation remained high, up low double-digits in food categories. It’s important to remember that while year-over-year inflation started to moderate as the quarter progressed, this is largely due to lapping higher levels from last year. On a two-year stack basis, food inflation remains over 20% and continues to pressure discretionary wallets. Share gains and grocery continued, including from higher income households as our strong price gaps resonate with customers who are increasingly prioritizing value and convenience.
Photo by Fikri Rasyid on Unsplash
Notable examples of consumer staples ETFs encompass the iShares Global Consumer Staples ETF (NYSEARCA:KXI), Consumer Staples Select Sector SPDR Fund (NYSEARCA:XLP), and Vanguard Consumer Staples Fund (NYSEARCA:VDC), among other options.
Our Methodology
We have curated a selection of ETFs that provide access to consumer staples stocks across various market capitalizations, including large-, mid-, and small-cap companies. This compilation aims to encompass a comprehensive array of well-regarded funds listed on US exchanges. Moreover, we have mentioned the top holdings of these ETFs, which includes the likes of Walmart Inc. (NYSE:WMT), Coca-Cola Company (NYSE:KO), and Costco Wholesale Corporation (NASDAQ:COST), to provide more insight to prospective investors. Notably, these energy ETFs have achieved noteworthy growth over the past 5 years. The list is organized in ascending order based on the 5-year performance as of August 14, 2023.
Best Consumer Staples ETFs
10. iShares Global Consumer Staples ETF (NYSE:KXI)
5-Year Performance as of August 14: 18.75%
The iShares Global Consumer Staples ETF (NYSE:KXI) replicates the performance of the S&P Global 1200 Consumer Staples Sector Index. This consumer staples-oriented ETF provides investors with the opportunity to invest in businesses located across diverse countries, including the United States, Switzerland, Japan, and the United Kingdom. The encompassed companies comprise food manufacturers, distributors, producers of nondurable household goods, and enterprises involved in food and drug retailing. Established in August 2018, the fund currently manages assets worth $1.483 billion.
The Procter & Gamble Company (NYSE:PG) is one of the top stocks in iShares Global Consumer Staples ETF (NYSE:KXI)’s portfolio. The Procter & Gamble Company (NYSE:PG) stands as a multinational consumer goods corporation based in Cincinnati, Ohio. It was established in 1837 by William Procter and James Gamble. The corporation offers branded consumer packaged goods on a global scale, functioning through distinct segments including Beauty, Grooming, Health Care, Fabric & Home Care, and Baby, Feminine & Family Care. During fiscal Q3 2023, The Procter & Gamble Company (NYSE: PG) recorded a 3.5% year-over-year growth in revenue, amounting to $20.07 billion. The company’s operating cash flow for the quarter reached approximately $4 billion, and its cash flow productivity was at an impressive 92%.
Rowan Street Capital made the following comment about The Procter & Gamble Company (NYSE:PG) in its Q4 2022 investor letter:
“Let’s look at The Procter & Gamble Company (NYSE:PG). Dividend yield is 2.4%. Earnings are forecasted to grow at 5.9%, and its current earnings multiple is at 25x. Now, let’s say over the next 3-5 years the market loses interest in the “safe”, mature companies that grow at anemic rates and gets an appetite for growth again. It’s very unlikely that Mr. Market will be paying 25x for 5.9% earnings growth. Let’s assume that multiple declines to the market average of 18x — that would be ~6.9% drag per year on the total expected return over next 3-5 years. If we get 2.4% (dividend) + 5.9% (earnings growth) – 6.9% (decrease in earnings multiple) = 1.4% (annual return we can expect on average from this stock).”
Similar to Walmart Inc. (NYSE:WMT), Coca-Cola Company (NYSE:KO), and Costco Wholesale Corporation (NASDAQ:COST), The Procter & Gamble Company (NYSE:PG) is one of the best consumer staples stocks to invest in.
9. Invesco DWA Consumer Staples Momentum ETF (NASDAQ:PSL)
5-Year Performance as of August 14: 21.34%
The basis of the Invesco DWA Consumer Staples Momentum ETF (NASDAQ:PSL) lies in the Dorsey Wright? Consumer Staples Technical Leaders Index. Typically, the fund will allocate at least 90% of its overall assets to the securities constituting the Index. The Index is structured to pinpoint companies exhibiting relative strength (momentum) and includes a minimum of 30 stocks sourced from the NASDAQ US Benchmark Index.
e.l.f. Beauty, Inc. (NYSE:ELF) stands as Invesco DWA Consumer Staples Momentum ETF (NASDAQ:PSL)'s top stock by percentage. The company offers cosmetic and skincare products globally through its brands, including e.l.f. Cosmetics, e.l.f. Skin, Well People, and Keys Soulcare. e.l.f. Beauty, Inc. (NYSE: ELF) anticipates net sales for fiscal 2024 to fall within the bracket of $705 million to $720 million, surpassing the consensus estimate of $637.72 million. Similarly, the projected range for adjusted diluted earnings per share is set at $1.73 to $1.76, exceeding the consensus estimate of $1.64.
Diamond Hill Long-Short Fund made the following comment about E.l.f. Beauty, Inc. (NYSE:ELF) in its Q4 2022 investor letter:
“New positions initiated in Q4 included shorts International Business Machines (IBM), Acushnet Holdings (GOLF) and E.l.f. Beauty, Inc. (NYSE:ELF). Shares of value-oriented beauty brand ELF received a meaningful boost from normalizing beauty usage and spending in a post-COVID environment, which we believe has contributed to its premium multiple relative to competitors in the beauty space. As this temporary lift unwinds, we expect elf’s valuation to similarly return to a level better aligned with its product offerings.”
8. Invesco S&P SmallCap Consumer Staples ETF (NASDAQ:PSCC)
5-Year Performance as of August 14: 30.06%
The foundation of the Invesco S&P SmallCap Consumer Staples ETF (NASDAQ:PSCC) lies in the S&P SmallCap 600? Capped Consumer Staples Index. The fund will usually allocate at least 90% of its total assets to the securities of small-capitalization US consumer staples companies that constitute the Index. The Index is formulated to assess the comprehensive performance of common stocks belonging to US consumer staples companies. These businesses are primarily involved in offering non-cyclical consumer goods and services, including tobacco, textiles, food and beverage, and nondiscretionary retail. The fund offers a Total Expense Ratio of 0.29% as of July 31.
7. First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG)
5-Year Performance as of August 14: 30.19%
The primary objective of the First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG) is to achieve investment outcomes that generally align with the price and yield of the Nasdaq US Smart Food & Beverage TM Index. The fund's securities roster encompasses brewers, distillers, and vintners, as well as manufacturers, distributors, and packagers of food and beverage products. Additionally, it comprises companies engaged in crop cultivation, livestock raising, fisheries operations, and nontobacco plantation ownership. As of July 31, the fund’s 30-day SEC yield stands at 2.76%. First Trust Nasdaq Food & Beverage ETF is one of the best consumer staples ETFs to monitor.
Mondelez International, Inc. (NASDAQ:MDLZ) is the biggest stock in First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG)'s portfolio. Headquartered in Chicago, Illinois, Mondelez International, Inc. (NASDAQ:MDLZ) is a prominent snack company. Its product range encompasses a diverse array of snacks, ranging from cookies, crackers, and salty snacks to chocolate, as well as candies, cheese, grocery items, and beverages. Renowned for its creation of iconic brands like Cadbury, Oreo, Milka Chocolate, and Trident, this snack industry leader distributes its products across over 150 countries. As the second quarter of this year came to a close, 55 out of the 910 hedge funds listed in Insider Monkey's database had added Mondelez International, Inc. (NASDAQ:MDLZ) shares to their portfolios. Among these, the most substantial investment was made by Brandon Haley's Holocene Advisors, amounting to $247.13 million.
6. First Trust Consumer Staples AlphaDEX Fund (NYSE:FXG)
5-Year Performance as of August 14: 31.25%
The First Trust Consumer Staples AlphaDEX (NYSE:FXG) Fund aims to track the performance of the StrataQuant? Consumer Staples Index, which employs a unique AlphaDEX methodology. The AlphaDEX methodology involves a quantitative approach that combines both fundamental and technical factors to select and rank stocks within the consumer staples sector. The goal is to identify companies with strong growth potential and favorable fundamentals. This process goes beyond traditional market capitalization-based indexing, seeking to potentially enhance returns by focusing on factors such as price momentum, value, quality, and volatility.
Archer-Daniels-Midland Company (NYSE:ADM), an American multinational food processing and commodities trading corporation, is one of the largest holdings of First Trust Consumer Staples AlphaDEX Fund (NYSE:FXG). Headquartered in Illinois, the corporation holds a significant position as one of the globe's largest agricultural processors and providers of food ingredients. Over the last five years, its dividends have experienced an annual growth of 6.1%. Presently, the company provides a quarterly dividend of $0.45 per share, reflecting a dividend yield of 2.18% as of August 14.
Much like Walmart Inc. (NYSE:WMT), Coca-Cola Company (NYSE:KO), and Costco Wholesale Corporation (NASDAQ:COST), Archer-Daniels-Midland Company (NYSE:ADM) is one of the best stocks to watch in the consumer staples space.
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Disclosure: None. 10 Best Consumer Staples ETFs is originally published on Insider Monkey.