The iShares U.S. Consumer Staples ETF (NYSEMKT:IYK) offers broad sector exposure and lower costs, while the First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG) provides a targeted play on food and beverage producers.
Investors seeking defensive equity exposure often turn to consumer staples to anchor their portfolios during periods of market volatility. This comparison examines whether a broad-based staples approach or a specialized niche in the food and beverage industry better suits your investment goals, considering differences in cost, liquidity, and portfolio concentration.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from monthly returns over the available fund history (up to five years). The 1-year return represents total return over the trailing 12Â months. Dividend yield is the trailing-12-month distribution yield.
IYK is the more affordable option with a 0.38% expense ratio compared to 0.6% for FTXG. While both funds offer a 2.5% dividend yield, the cost savings in the iShares ETF may appeal to long-term investors.
Performance & risk comparison
What’s inside
The iShares U.S. Consumer Staples ETF holds a diverse basket of 53 securities, concentrating on the stability of the consumer defensive sector (82%) with additional exposure to healthcare (14%) and basic materials (2%). Its largest positions include Coca-Cola (NYSE:KO) at 13.39%, Procter & Gamble (NYSE:PG) at 12.70%, and Philip Morris International (NYSE:PM) at 11.40%. This iShares ETF launched in 2000, and has paid $1.90 per share over the trailing 12 months, which on its recent ~$74.69 share price works out to a 2.5% yield.
The First Trust Nasdaq Food & Beverage ETF maintains a narrower portfolio of 31 holdings, leaning heavily into consumer defensive stocks (94%) while allocating 5% to basic materials and 1% to industrials. Top holdings include the Archer-Daniels-Midland Company (NYSE:ADM) at 9.42%, Coca-Cola at 8.98%, and The Kraft Heinz Company (NASDAQ:KHC) at 8.40%. This First Trust fund launched in 2016, and has paid $0.58 per share over the trailing 12 months, which on its recent ~$23.02 share price works out to a 2.5% yield.
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Which looks like the better buy
Adding consumer staples stocks to your portfolio is a good defensive play, as well as a generator of passive income, given the solid dividends paid by the equities in the sector. The iShares U.S. Consumer Staples ETF (IYK) and First Trust Nasdaq Food & Beverage ETF (FTXG) are two potential choices in this area.
However, unless you want targeted exposure to the food and beverage market, IYK is the better fund to buy. This ETF covers the entire consumer staples industry, providing some protection against a downturn in a particular sub-sector.
IYK’s one-year and five-year returns are superior to FTXG, and its lower expense ratio helps you keep more of your gains. The fund also boasts a much larger AUM, giving you outstanding liquidity.
FTXG tracks the Nasdaq US Smart Food & Beverage Index, which employs a modified factor weighted index for fund inclusion. This involves looking at metrics such as gross income and cash flow. If the methodology is appealing, or you specifically want to add food and beverage stocks to your portfolio, FTXG could be worthy of consideration.
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Robert Izquierdo has positions in Coca-Cola and Kraft Heinz. The Motley Fool recommends Kraft Heinz and Philip Morris International. The Motley Fool has a disclosure policy.
Better Consumer Staples ETF: the iShares IYK vs. First Trust’s Food and Beverage-Focused FTXG was originally published by The Motley Fool
