So far on the site around a third of the posts have been focused exclusively on consumer staples stocks; they take up by far the largest number of posts of any one category. In contrast ETFs and mutual funds have taken up precisely zero posts so far. The reason for that is simply because it’s more fun to look at the records for individual companies than trudging through a broad basket of stocks. After all I’d guess that pretty much 99% of the folks that stick around reading stuff on the site are stock junkies.
That said I’m mindful of giving off the impression that “stock picking” is the way to go. In fact for the majority of folks that aren’t stock junkies then indexing is going to be the best way to get exposure to equities. So, from this point on I’ll be including them on the site from time to time, and in honor of my apparent love for the sector I’ll start with four of the best consumer staples ETFs.
Vanguard Consumer Staples ETF (NYSEARCA: VDC)
This is one of the cheapest consumer staples tracker funds out there with an expense ratio of just 0.1%. It’s tilted toward the mega-caps, and as of the end of last year the fund’s top five holdings were Procter & Gamble, Coca-Cola, PepsiCo, Philip Morris International and Altria. Between them they accounted for around 40% of the fund. Other notable holdings include Mondelez International, Colgate Palmolive and Kraft Heinz. Basically it’s stuffed full of great dividend stocks, a ton of which are have years of consecutive annual dividend growth behind them. Of the top fifteen holdings over a third of them are dividend aristocrats (i.e. stocks with twenty five years of consecutive annual dividend growth). Dividends for the fund are paid out on a quarterly basis in March, June, September and December.
Guggenheim S&P 500 Equal Weight Consumer Staples ETF (NYSEARCA: RHS)
Although still focused on US listed corporations The Guggenheim Consumer Staples ETF differs from Vanguard in that being equal weighted means it is less slanted towards the mega-cap corporations. This gives more prominence to smaller, but nonetheless still super high quality, consumer staples stocks such as Hershey, Clorox, Church & Dwight, McCormick, Dr Pepper Snapple Group and J.M. Smucker. The return on equity for the fund’s holdings is something like 40%, so again you know it’s stuffed full of high quality profit machines. As with the Vanguard Consumer Staples ETF it pays out distributions on a quarterly basis in March, June, September and December. The expense ratio is a little higher though with this one at 0.4%.
SPDR S&P International Consumer Staples Sector ETF (NYSEARCA: IPS)
As its name suggests this consumer staples fund from State Street Global Advisors is entirely focused on international names. With the Vanguard and Guggenheim funds pretty much 100% of the holdings were US listed stocks. For the SPDR fund it’s 100% international (i.e. 100% ex-USA). Indeed the aim of the fund is to match the S&P Developed Ex-U.S. BMI Consumer Staples Sector. Since most ex-USA staples come out of Europe then that means heavy exposure to European stocks. As it stands I think something like 80% of the fund’s holdings European listed stocks. Top ten holdings include the likes of Nestlé, British American Tobacco, Diageo, Unilever and L’Oréal. As with the two US-focused funds above this one also pays out distributions on a quarterly basis.
iShares Global Consumer Staples ETF (NYSEARCA: KXI)
The final one I’ll introduce is the true global consumer stables mix, combining the best of both USA and ex-USA. The top five holdings right now are Procter & Gamble, Nestlé, Philip Morris International, Coca-Cola and PepsiCo. Other stocks to make the top twenty holdings of the fund include Colgate Palmolive, Diageo, Kraft Heinz, Anheuser Busch InBev and Unilever. It’s pretty much a who’s who list of the best companies on the planet. 55% of the fund is in United States listed stocks and the remainder is predominantly European (United Kingdom, Switzerland and France being the largest). Japan, Australia and Canada currently represent the largest non-US and non-European countries. Unlike the other ETFs this one only pays out biannually, with distributions going out in June and December each year.
You all know the drill by now with the high quality defensives: great companies, poor prices. The hunt for high quality yield has driven valuations and recent returns up, but has had the opposite effect for current dividend yields and forward returns. Of the four consumer staples ETFs I’ve just gone through the average dividend yield is around 2% and the average P/E ratio is around 22x earnings. In other words they’re not exactly priced to generate super forward returns from these levels. That said I like the fact you can own these with zero maintenance. If you were to commit to a dollar cost averaging programme and check back in a few decades then I imagine the results would look pretty good. At the end of the day the likes of Procter & Gamble, Nestlé, Coca-Cola and PepsiCo aren’t going anywhere in a hurry, and this way you get exposure to pretty much all of the best names in a single vehicle.