S&P's Favorite Consumer Staples ETFs | ETF Trends

Consumer staples exchange traded funds have offered investors a safe place to park their capital amid the market volatility over the past year. S&P Capital IQ recently weighted the three largest consumer staples ETFs “Overweight” in a recent note.

“Within the Risk Considerations category, each of the three ETFs received a relatively favorable appraisal from the S&P Quality Rank metric, which suggests a relatively good earnings and dividend track record for companies of which these ETFs owned shares,” S&P said in the note. [Why Consumer Staples ETFs Are Holding Their Own]

The consumer staples sector will remain a defensive play amid the market uncertainty for the remainder of 2012. The sector has a high dividend yield and good dividend growth potential, reports Tom Graves, S&P Capital analyst.

The three funds highlighted by the recent research note include:

  • Consumer Staples Select Sector SPDR (NYSEArca: XLPup 8.65%; This is the largest and least expensive ETF. The top  10 holdings account for 70% of the fund. [5 ETFs Hitting Highs in 2012]
  • iShares Dow Jones US Consumer Goods (NYSEArca: IYK) up 7.45%; The top 10 holdings account for 59%of the fund.
  • Vanguard Consumer Staples ETF (NYSEArca:VDCup 10%; The top 10 stocks account for about 66% of the fund.[Quality and Defense with Consumer Staples ETFs]
All 3 staples ETFs feature Procter & Gamble (NYSE:PG), Coca-Cola (NYSE: KO) and Phillip Morris (NYSE: PM) as the top holdings. Other stocks the funds have in common include Wal-Mart (NYSE:WMT), PepsiCo (NYSE: PEP) and Kraft (NYSE: KFT).
“The news has been decent on the demand side for many consumer companies, with continued solid consumer spending. Reports show that consumers are continuing to spend, despite concerns about future inflation, higher fuel prices, and still-high unemployment. With consumption representing some 71% of U.S. GDP, recent consumer-spending data points are promising, although we caution that results could go the other way in a hurry if sentiment turns,” Robert Goldsborough wrote on Morningstar.
 Consumer Staples Select Sector SPDR

Tisha Guerrero contributed to this article. 

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.