Consumer staples ETFs are a type of investment vehicle that is designed to replicate the performance of a certain index or portfolio of stocks.
Consumer staples ETFs belong to companies involved in the production of vital products and services.
Consumer staples are commonly defined as goods that customers tend to buy irrespective of the prevailing economic circumstances.
Consumer staples companies tend to exhibit a higher degree of stability due to the consistent demand for their products.
Investing in an ETF that focuses on consumer staples may be deemed an appealing option amidst periods of economic turmoil.
Consumer staples corporations often encompass a range of industries, such as food and beverage production, household products manufacturing, personal care product manufacturing, and other related enterprises.
Investors can achieve exposure to a diverse portfolio of consumer staple companies through the acquisition of a consumer staple ETF, circumventing the need to individually purchase stocks.
Continue reading to acquire further knowledge regarding the most optimal ETFs in the consumer staples sector, as well as the steps you can take to initiate your investment in these funds.
Private banking clients often seek guidance on their investment portfolios, and one option for diversification includes exploring the best consumer staples ETFs, while also considering the potential of investment funds specializing in sectors like airline, defense, and artificial intelligence ETFs.
If you want to invest as an expat or high-net-worth individual, you can email me (advice@adamfayed.com) or use these contact options.
What are Consumer Staples ETFs
An ETF is a type of mutual fund that trades on a stock market like the New York Stock Exchange or the NASDAQ.
Mutual funds are a collection of individual equities that trade as a single entity. ETFs are created by investment firms and typically contain a portfolio of assets that mirrors the underlying index or market segment.
ETFs are able to replicate the performance of a certain index, such as the S&P 500 or the Dow Jones Industrial Average.
Shares of the fund can be purchased and sold on a stock exchange, just like any other stock.
ETFs offer investors diversification because of the wide range of securities they own. You can mitigate the impact of a decline in the value of a single stock in a portfolio of equities (like an ETF) by investing in many stocks.
Finally, ETFs typically have lower fees than mutual funds and other investment vehicles.
There are numerous ETFs to choose from. Some ETFs are designed to track entire markets or indices, while others are more narrowly focused on certain industries. A consumer staples ETF invests mostly in stocks of firms that manufacture common household items.
Commonly sold items from these businesses include food, beverages, tobacco products, and cleaning and personal care items for the home.
What are the Best Consumer Staples ETFs
Invesco Dynamic Food & Beverage ETF (NYSE:PBJ)
The Invesco Dynamic Food & Beverage ETF (NYSE:PBJ) is constructed in accordance with the Dynamic Food & Beverage Intellidex℠ Index.
The major aim of the Index is to attain capital appreciation by conducting a complete evaluation of firms based on many aspects that determine their investment worthiness.
The aforementioned factors include price movement, quality, earnings momentum, value, and management action.
The Index comprises shares from a selection of 30 food and beverage companies situated in the United States.
These companies are largely engaged in activities connected to the manufacturing, selling, or distribution of food and beverage products, innovative food technology, and agricultural commodities research.
The Kroger Co., a retail corporation headquartered in Ohio, is principally engaged in the sale of groceries and associated merchandise.
It is a notable constituent of the Invesco Dynamic Food & Beverage ETF (NYSE:PBJ). The earnings report for the first quarter of 2023 was released by the corporation on June 15th.
Throughout the current quarter, a notable growth of 1.3% in revenue was observed in comparison to the same time in the previous year, resulting in a cumulative sum of $45.1 billion.
As of the present year, the company has experienced an increase in operating cash flow, reaching a total of $2.8 billion, which demonstrates growth compared to the previous year’s amount of $1.1 billion.
First Trust Consumer Staples AlphaDEX Fund (NYSE:FXG)
The primary objective of the First Trust Consumer Staples AlphaDEX (NYSE:FXG) Fund is to replicate the investment results of the StrataQuant® Consumer Staples Index.
This index utilizes a distinctive AlphaDEX approach in its methodology. The AlphaDEX methodology employs a quantitative strategy that integrates fundamental and technical indicators in order to identify and prioritize stocks within the consumer staples sector.
The objective is to ascertain corporations exhibiting robust growth potential and attractive underlying characteristics.
This procedure extends beyond the conventional approach of market capitalization-based indexing, aiming to potentially augment returns by emphasizing aspects such as price momentum, quality, value, and volatility.
Archer-Daniels-Midland Company (NYSE:ADM) is a prominent American multinational firm involved in food processing and commodities trading.
It holds a significant position within the First Trust Consumer Staples AlphaDEX Fund (NYSE:FXG), which is a notable investment portfolio.
The firm, which is based in Illinois, occupies a prominent position as one of the world’s leading agricultural processors and suppliers of food components.
During the preceding five-year period, the dividends of the subject in question have demonstrated a consistent yearly growth rate of 6.1%.
Currently, the firm offers a dividend of $0.45 per share on a quarterly basis, resulting in a dividend yield of 2.18% as of August 14th.
Archer-Daniels-Midland Company (NYSE:ADM) is seen as a notable stock to monitor within the consumer staples sector, similar to prominent companies such as Walmart Inc. (NYSE:WMT), Coca-Cola Company (NYSE:KO), and Costco Wholesale Corporation (NASDAQ:COST).
Consumer Staples Select Sector SPDR Fund (NYSE:XLP)
The objective of the Consumer Staples Select Sector SPDR Fund (NYSE:XLP) is to mirror the performance of the Consumer Staples Select Sector Index.
The Consumer Staples Select Sector Index comprises companies operating across many industries, namely consumer staples distribution and retail, household items, food products, drinks, tobacco, and personal care products.
As of March 2023, the fund had a total of $18.14 billion in AUM and a 30-day SEC Yield of 2.50%.
PepsiCo, Inc., a well-known company listed on the NASDAQ stock exchange under the ticker symbol PEP, holds a significant position in the portfolio of the Consumer Staples Select Sector SPDR Fund (traded on the NYSE under the ticker symbol XLP).
PepsiCo, Inc. (NASDAQ:PEP) is a food corporation headquartered in New York, principally involved in the manufacturing, promotion, and distribution of a wide range of food and beverage items.
By the conclusion of the second quarter of 2023, a total of 68 hedge funds, as recorded in Insider Monkey’s database, disclosed their ownership of shares in PepsiCo, Inc. (NASDAQ:PEP). The combined value of these stakes exceeds $3.5 billion.
First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG)
The main goal of the First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG) is to attain investment results that typically correspond with the price and yield of the Nasdaq US Smart Food & Beverage TM Index.
The portfolio of securities held by the fund includes companies engaged in the production and distribution of alcoholic beverages such as distillers, brewers, and vintners, as well as manufacturers, packagers, and distributors of food and beverage goods.
Furthermore, it encompasses enterprises involved in the cultivation of crops, breeding of livestock, operations in the fisheries sector, and ownership of plantations excluding tobacco.
The 30-day SEC yield of the fund is currently 2.76% as of July 31. The First Trust Nasdaq Food & Beverage ETF is regarded as a very notable ETF within the consumer staples sector, making it a worthwhile option to closely observe.
Mondelez International, Inc. (NASDAQ: MDLZ) holds the largest position inside the portfolio of the First Trust Nasdaq Food & Beverage ETF (NASDAQ: FTXG).
Mondelez International, Inc. (NASDAQ:MDLZ) is a well-established snack corporation with its headquarters located in Chicago, Illinois.
The company offers a wide variety of snack products, including grocery items, cookies, salty snacks, crackers, cheese, chocolate, chocolates, and beverages.
This food industry giant is widely recognized for its establishment of renowned brands such as Cadbury, Oreo, Milka Chocolate, and Trident.
Its extensive distribution network spans over more than 150 countries. At the conclusion of the second quarter of the current year, a total of 55 hedge funds, out of the 910 hedge funds, made the decision to include shares of Mondelez International, Inc. (NASDAQ:MDLZ) in their investment portfolios.
Out of the aforementioned investments, the most significant financial commitment was made by Holocene Advisors, managed by Brandon Haley, totalling $247.13 million.
iShares US Consumer Staples ETF (NYSE:IYK)
The iShares US Consumer Staples ETF (NYSE:IYK) is an ETF that has been specifically structured to offer investors the opportunity to gain exposure to the consumer staples sector within the equity market of the United States.
The fund, which is overseen by iShares, a subsidiary of BlackRock, seeks to replicate the investment returns of the Dow Jones U.S. Consumer Goods Index.
One prominent asset inside the iShares US Consumer Staples ETF (NYSE:IYK) collection is Philip Morris International Inc. (NYSE:PM), a tobacco enterprise that primarily focuses on the distribution of cigarettes and smokeless substitutes.
The aforementioned alternatives comprise vapour, heat-not-burn, and oral nicotine solutions.
On July 20, Philip Morris International Inc. (NYSE:PM) publicly reported its second quarter non-GAAP earnings per share (EPS) as $1.60, along with a corresponding revenue amount of $9 billion.
The findings surpassed the forecasts of Wall Street by $0.12 and $290 million, correspondingly.
Vanguard Consumer Staples Fund (NYSE:VDC)
The MSCI US Investable Market Consumer Staples 25/50 Index is used as a benchmark for big, mid, and small capitalization U.S. consumer staples stocks, and the Vanguard Consumer Staples Fund (NYSE:VDC) aims to replicate its performance.
Companies in the consumer staples industry are sorted into GICS categories for this index.
This industry group, in particular, includes companies that tend to be less volatile as a result of economic shifts.
It includes the production and distribution of food, drink, and tobacco products, the manufacturing and distribution of nondurable domestic goods and personal products, and the retailing of food, drugs, and other consumer staples.
Among the top holdings of the Vanguard Consumer Staples Fund (NYSE:VDC) is Costco Wholesale Corporation (NASDAQ:COST).
Washington-based Costco Wholesale Corporation (NASDAQ:COST) is a retailer that focuses on running warehouse clubs for members only.
The organization has made a name for itself in the retail industry by offering its members a wide range of products at steep discounts.
The stock price rose 23% year-to-date despite missing Q2 EPS projections by a wide margin.
Final Thoughts
Investing in consumer staples may present a favourable opportunity for investors seeking stability and long-term growth prospects.
Consumer staples are important for everyday existence and exhibit consistent demand irrespective of economic fluctuations.
Gaining familiarity with x methods aimed at outperforming the market and conducting research on consumer staple ETFs might potentially provide investors with a distinct level of stability as they pursue their long-term investment objectives.
It is advisable to seek guidance from a knowledgeable financial advisor who is well-versed in your specific objectives prior to making significant investment decisions in ETFs, similar to any other investment.
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