With above-average dividend yields and low risk exposure, defensive consumer staple sector exchange traded funds could be a safer way to play the markets.

“We think some higher-yielding Consumer Staples stocks are seen as an alternative to bonds, with opportunity for dividend increases and less risk of a price decline if interest rates rise,” writes Tom Graves, CFA, S&P Capital IQ Equity Analyst, in a research note.

So far this year, consumer staple stocks have gained 14.8%, compared to the 9.6% in the broader S&P 500. Delving deeper into the sector, agricultural products and drug retail sub sectors were the top performers, increasing 21.1% and 19.2% year-to-date through April 8, respectively. [The Other ‘Great Rotation’ to Defensive Sector ETFs]

“The S&P Capital IQ Equity Strategy Group thinks the Federal Reserve’s monetary policy, which is keeping interest rates low, is pushing income-starved investors toward high quality dividend growers, such as those found in the Consumer Staples sector,” Graves added. “The strategy group sees sector stocks benefiting from a search for quality and yield, with less market risk than there is in global cyclical stocks.”

Among consumer staples sector ETFs, S&P Capital IQ analysts have an “overweight” ranking for Consumer Staples Select Sector SPDR Fund (NYSEArca: XLP), which has a 2.71% yield, iShares Dow Jones US Consumer Goods (NYSEArca: IYK), which has a 2.01% yield, iShares S&P Global Consumer Staples Sector Index Fund (NYSEArca: KXI), which has a 2.44% yield, and Vanguard Consumer Staples Index Fund (NYSEArca: VDC), which has a 2.57% yield.

The analysts expect earnings will be bolstered by moderating commodity costs, restructuring/cost-reductions and stock repurchase activity. Moreover, U.S. companies could be looking for greater mergers and acquisitions opportunities as a way to tap into international growth.

For more information on the consumers staples sector, visit our consumer staples category.

Max Chen contributed to this article.

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