The iShares U.S. Consumer Staples ETF (NYSEMKT:IYK) provides broad sector exposure with competitive pricing, while the First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG) offers concentrated exposure to food and beverage producers.
Consumer staples frequently serve as a defensive anchor for portfolios during periods of market uncertainty. This analysis evaluates whether a diversified approach to the staples sector or a specialized focus on food and beverage better aligns with your investment objectives, considering factors such as expense ratios, liquidity, and portfolio composition.
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 12 months. Dividend yield is the trailing-12-month distribution yield.
IYK presents a more cost-effective option with a 0.38% expense ratio, compared to FTXG’s 0.6%. Both funds deliver a 2.5% dividend yield, though IYK’s lower cost structure may benefit long-term investors seeking to maximize returns.
Performance & risk comparison
What’s inside
The iShares U.S. Consumer Staples ETF maintains a diversified portfolio of 53 securities, with primary emphasis on the consumer defensive sector (82%), complemented by healthcare (14%) and basic materials (2%) allocations. Key holdings 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 fund debuted in 2000 and has distributed $1.90 per share over the trailing 12 months, translating to a 2.5% yield based on its recent share price of approximately $74.69.
The First Trust Nasdaq Food & Beverage ETF maintains a more concentrated portfolio of 31 holdings, with substantial allocation to consumer defensive stocks (94%), along with basic materials (5%) and industrials (1%). Top holdings comprise 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, equating to a 2.5% yield based on its recent share price of approximately $23.02.
Which looks like the better buy
Incorporating consumer staples into a portfolio represents a sound defensive strategy, while also generating passive income through the sector’s attractive dividend yields. The iShares U.S. Consumer Staples ETF (IYK) and First Trust Nasdaq Food & Beverage ETF (FTXG) represent two viable options in this space.
However, unless targeted exposure to the food and beverage sector is specifically desired, IYK emerges as the more compelling choice. This ETF encompasses the broader consumer staples industry, offering protection against downturns in any particular sub-sector.
IYK demonstrates superior performance over both one-year and five-year periods compared to FTXG, and its reduced expense ratio preserves more of your investment gains. The fund also commands significantly greater assets under management, ensuring excellent liquidity for investors.
FTXG follows the Nasdaq US Smart Food & Beverage Index, which employs a modified factor-weighted methodology for constituent selection, evaluating metrics such as gross income and cash flow. If this approach appeals to you, or if you specifically seek food and beverage sector exposure, FTXG merits consideration.
