PBJ vs. XLP: Which Consumer Staples ETF Is the Better Buy?

The State Street Consumer Staples Select Sector SPDR ETF (NYSEMKT:XLP) and the Invesco Food & Beverage ETF (NYSEMKT:PBJ) both deliver exposure to U.S. consumer staples, but with a few notable differences.

XLP charges lower fees, yields more, and aims for broad, low-cost coverage of the consumer staples sector -- while PBJ zeroes in on food and beverage companies.

Snapshot (cost & size)

Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-yr return represents total return over the trailing 12 months.

XLP is notably cheaper, with an expense ratio of 0.08% compared to PBJ’s 0.61%. XLP also offers a higher dividend yield at 2.4%, while PBJ’s payout sits at 1.6% -- a meaningful difference for income-focused investors.

Performance & risk comparison

PBJ has the edge on recent one-year performance, though XLP is slightly ahead on five-year total return. Both funds carry betas below 1.0, meaning they tend to move less dramatically than the broader market -- a feature that makes consumer staples ETFs a popular choice during periods of economic uncertainty.

What's inside

PBJ holds around 30 stocks, focusing on food and beverage companies, but with a tilt toward agricultural inputs and food distribution. Its largest positions include Corteva (NYSE:CTVA), Kroger (NYSE:KR), and Archer-Daniels-Midland (NYSE:ADM). This approach may appeal to those seeking targeted exposure with some diversification beyond pure consumer defensive names. PBJ's focus is the narrower of the two funds.

XLP, by contrast, holds 35 stocks and tracks the S&P’s consumer staples sector, with holdings spread across household products, personal care, and retail giants. Top positions include Walmart (NASDAQ:WMT), Costco Wholesale (NASDAQ:COST), and Procter & Gamble (NYSE:PG)-- with those three companies alone making up 29% of the portfolio. With bets across the full consumer staples sector, XLP is a good fit for investors seeking broad blue chip exposure without sector drift.

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What this means for investors

Consumer staples ETFs don't typically generate headlines for explosive growth -- and that's kind of the point. In an environment where inflation is pressuring household budgets and investors remain cautious, defensive sector funds like XLP and PBJ are drawing renewed interest as portfolio stabilizers.

The choice between the two ultimately comes down to what you're optimizing for. If cost efficiency and income are priorities, XLP is hard to argue against. At just 0.08% annually, it's one of the cheapest ways to get diversified exposure to this sector -- and its 2.4% yield beats XLP’s 1.6%. Its holdings represent some of the most resilient businesses in the U.S. economy, the kinds of companies that tend to hold up even when consumers pull back on discretionary spending.

PBJ makes a different case. Its tighter focus on the food and beverage industry has helped it beat XLP over the past year. For investors who believe food companies are particularly well-positioned right now, that specificity could be attractive. Just know you'll pay more for it: PBJ’s 0.61% expense ratio is nearly eight times XLP's fee.

For most long-term investors prioritizing simplicity and low cost, XLP's profile is tough to beat. PBJ is better suited for those with a stronger conviction in food and beverage companies -- and the patience to look past a higher fee and lower yield.

Andy Gould has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool recommends Kroger. The Motley Fool has a disclosure policy.