Durable and defensive: A look at U.S. consumer staples ETFs

If investors can get past valuations in the consumer staples sector, there are a raft of low-cost ETF options offering access to the space.

Robert Goldsborough 15 March, 2016 | 5:00PM
Facebook Twitter LinkedIn

U.S. consumer staples stocks performed well in 2015. In aggregate, this defensive sector returned nearly 7%, as measured by the performance of  Consumer Staples Select Sector SPDR ETF (XLP). This was meaningfully higher than the S&P 500's 1.3% return. In general, consumer staples companies tend to outperform during recessionary periods and, to a lesser extent, in late-cycle periods.

Morningstar's equity analysts believe that what drove staples firms' performance last year is the same dynamic that has fueled their valuations during the ultralow-interest-rate environment of the past few years: The sector's healthy dividends have captured the interest of income-seeking investors. Historically, consumer staples stocks have been sensitive to interest-rate hikes because most staples firms can't grow their earnings fast enough during economic expansions to offset the negative impact of rising rates. However, during this most recent expansion, rates have remained at historically low levels.

Meanwhile, staples firms have enjoyed robust cash flows stemming from U.S. growth, a slow recovery in Europe and cost-cutting measures. The upshot in 2015 was that staples firms in the United States were generally sporting dividend yields in the 2.5% to 3.0% range, even as their stock prices rose. In fact, XLP's dividend grew 9.5% in 2015.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free
Facebook Twitter LinkedIn

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Altria Group Inc49.95 USD0.93Rating
Amerco Inc620.41 USD1.42
Anheuser-Busch InBev SA/NV ADR74.59 USD-0.55Rating
Coca-Cola Co54.51 USD-0.06Rating
Constellation Brands Inc A240.92 USD-0.29Rating
Costco Wholesale Corp384.32 USD0.41Rating
CVS Health Corp85.11 USD1.68Rating
Nestle SA ADR120.99 USD0.55Rating
PepsiCo Inc145.56 USD0.00Rating
Philip Morris International Inc97.41 USD0.61Rating
Procter & Gamble Co135.15 USD0.01Rating
Rite Aid Corp18.01 USD1.29
Stamps.com Inc185.90 USD-3.51
Terminix Global Holdings Inc49.98 USD2.42
The Kraft Heinz Co43.48 USD0.83Rating
Walgreens Boots Alliance Inc54.53 USD0.13Rating
Walmart Inc140.20 USD-0.60Rating

About Author

Robert Goldsborough

Robert Goldsborough  Robert Goldsborough is an analyst covering equity strategies on Morningstar’s manager research team.

© Copyright 2021 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies