SPDR Consumer Staples Select Sector ETF (XLP) is a fund comprised of companies whose products and services are virtually essential for everyday life in the 21st century. Included in the consumer staples sector are companies involved in food and retailing, food products, personal products, tobacco and beverage making.
Such publicly traded companies often are called “defensive” stocks because they tend to maintain a more stable price than stocks in other sectors during a bear market. Whereas consumers may choose to save money by not buying unnecessary luxury items, there is a constant need for products that are required for everyday living, regardless of market conditions. In addition, “sin stocks” such as tobacco and alcohol, also covered under Consumer Staples because they see similarly inelastic demand, may rise in price during this time.
As shown below, XLP has remained relatively stable throughout the turbulent markets of 2015. It currently is up 2% year to date — and nearly 9% since a brief dip in late August. In addition, it offers a solid 2.5% dividend yield, with consecutive increases every quarter of 2015 so far. It sports an expense ratio of only 0.15% and more than $8 billion in assets managed.
Nearly two-thirds of XLP’s assets are contained in its top 10 holdings, which include several prominent food retailers and supply stores. Procter and Gamble (PG) is XLP’s largest holding, with 11.57% of total assets. Next, 9.26% and 7.66% of assets, respectively, are invested in soda giant Coca-Cola (KO) and tobacco producer Philip Morris International (PM). Other top holdings include CVS Health Corporation (CVS), with 6.32%, and Altria Group (MO), 5.99%.
If you want to have peace of mind at night when you think about the stability of your investments, then the SPDR Consumer Staples Select Sector ETF (XLP) may be a good fund to check out.
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In case you missed it, I encourage you to read my e-letter column from last week about a materials sector ETF. I also invite you to comment in the space provided below.