Should You Invest in the Consumer Staples Select Sector SPDR ETF (XLP)?

Designed to provide broad exposure to the Consumer Staples – Broad segment of the equity market, the Consumer Staples Select Sector SPDR ETF (XLP) is a passively managed exchange traded fund launched on 12/16/1998.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Additionally, sector ETFs offer convenient ways to gain low risk and diversified exposure to a broad group of companies in particular sectors. Consumer Staples – Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 14, placing it in bottom 13%.

Index Details

The fund is sponsored by State Street Global Advisors. It has amassed assets over $15.89 billion, making it the largest ETF attempting to match the performance of the Consumer Staples – Broad segment of the equity market. XLP seeks to match the performance of the Consumer Staples Select Sector Index before fees and expenses.

The Consumer Staples Select Sector Index seeks to provide an effective representation of the consumer staples sector of the S&P 500 Index.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF’s expense ratio.

Annual operating expenses for this ETF are 0.10%, making it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 2.53%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund’s holdings is a valuable exercise. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Consumer Staples sector–about 100% of the portfolio.

Looking at individual holdings, Procter & Gamble Company (PG) accounts for about 15.27% of total assets, followed by Coca-Cola Company (KO) and Pepsico Inc. (PEP).

The top 10 holdings account for about 69.79% of total assets under management.

Performance and Risk

So far this year, XLP has lost about -6.38%, and is up roughly 1.93% in the last one year (as of 09/19/2022). During this past 52-week period, the fund has traded between $68.80 and $80.57.

The ETF has a beta of 0.56 and standard deviation of 19.50% for the trailing three-year period, making it a medium risk choice in the space. With about 35 holdings, it has more concentrated exposure than peers.

Alternatives

Consumer Staples Select Sector SPDR ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. XLP, then, is not a great choice for investors seeking exposure to the Consumer Staples ETFs segment of the market. Instead, there are better ETFs in the space to consider.

IShares U.S. Consumer Staples ETF (IYK) tracks Dow Jones U.S. Consumer Goods Index and the Vanguard Consumer Staples ETF (VDC) tracks MSCI US Investable Market Consumer Staples 25/50 Index. IShares U.S. Consumer Staples ETF has $1.55 billion in assets, Vanguard Consumer Staples ETF has $6.55 billion. IYK has an expense ratio of 0.41% and VDC charges 0.10%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Consumer Staples Select Sector SPDR ETF (XLP): ETF Research Reports
 
CocaCola Company The (KO) : Free Stock Analysis Report
 
Procter & Gamble Company The (PG) : Free Stock Analysis Report
 
PepsiCo, Inc. (PEP) : Free Stock Analysis Report
 
Vanguard Consumer Staples ETF (VDC): ETF Research Reports
 
iShares U.S. Consumer Staples ETF (IYK): ETF Research Reports
 
To read this article on Zacks.com click here.
 
Zacks Investment Research

Leave a Reply

Your email address will not be published. Required fields are marked *