PBJ vs. FTXG: How Have These Two Food & Beverage ETFs Stacked Up Against One Another (And the S&P 500?)

Invesco Food & Beverage ETF (NYSEMKT:PBJ) offers greater liquidity and lower historical drawdown, whereas First Trust Nasdaq Food & Beverage ETF (NASDAQ:FTXG) may appeal to income-focused investors due to its higher trailing dividend yield.

The Invesco fund tracks a quantitative index that selects 30 stocks based on share price trajectory and earnings expansion. Meanwhile, the First Trust fund follows the Nasdaq US Smart Food & Beverage Index to provide targeted exposure to domestic companies involved in the production and distribution of food items.

Snapshot (cost & size)

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

With expense ratios of 0.60% and 0.61%, respectively, these funds are priced nearly identically. However, a significant yield gap exists, as the First Trust fund offers more than double the trailing payout of its Invesco counterpart.

Performance & risk comparison

What's inside

Invesco Food & Beverage ETF (PBJ) maintains a portfolio of 31 holdings, with 86.00% of its assets concentrated in the consumer defensive sector. Its quantitative methodology evaluates companies based on fundamental quality and executive actions; its largest positions include Monster Beverage (NASDAQ:MNST) at 5.45%, Corteva (NYSE:CTVA) at 5.39%, and Coca-Cola (NYSE:KO) at 5.19%. It was launched in 2005. Invesco Food & Beverage ETF has paid $0.61 per share over the trailing 12 months, which, at its recent ~$47.94 share price, yields 1.30%.

First Trust Nasdaq Food & Beverage ETF (FTXG) also holds 31 stocks and allocates 87.00% to consumer defensive names. It targets a 95.00% correlation with its underlying index, and its top holdings include Archer-Daniels-Midland (NYSE:ADM) at 9.74%, Coca-Cola (NYSE:KO) at 8.56%, and Kraft Heinz (NASDAQ:KHC) at 8.48%. It was launched in 2016. First Trust Nasdaq Food & Beverage ETF has paid $0.58 per share over the trailing 12 months, which, at its recent ~$22.37 share price, yields 2.60%.

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Which looks like the better buy

The Invesco Food & Beverage ETF (PBJ) and the First Trust Nasdaq Food & Beverage ETF (FTXG) are both defensive sector exchange-traded funds (ETFs). Here is how they measure up to one another.

First, there’s PBJ. The fund tracks the Dynamic Food & Beverage Intellidex Index, which uses a quantitative, rules-based strategy to select stocks and allocates them based on a tier-weighting system. As a result, PBJ includes a wide range of stocks across the food & beverage subsector. Iconic brands like Starbucks, Coca-Cola, and PepsiCo are among its top 15 holdings, along with Kroger, Freshpet, and Aramark. As one might expect, PBJ pays a dividend. Its current yield of 1.27% isn’t enormous, but it is enough to keep income-oriented investors interested. Turning to fees, PBJ’s expense ratio is 0.61%, which is above average.

Then, there’s FTXG. This fund offers a slightly different approach to coverage of the food & beverage subsector. FTXG tracks the Nasdaq U.S. Smart Food & Beverage Index, another rules-based quantitative index. As a result, FTXG leans slightly more towards large and megacap stocks. Archer-Daniels-Midland, Coca-Cola, Kraft Heinz, Mondelez, and PepsiCo alone represent approximately 43% of the fund’s overall holdings. The fund’s expense ratio of 0.60% is nearly identical to PBJ, while its dividend yield of 2.60% is higher.

Turning to performance, PBJ has delivered better total returns over the last 10 years. PBJ has recorded a total return of 69%, with a compound annual growth rate (CAGR) of 5.5% since 2016. FTXG, meanwhile, has generated a total return of 38%, equating to a CAGR of 3.4%. The S&P 500, however, has outperformed both funds, with a total return of 308% and a CAGR of 15.5%.

In summary, investors seeking out defensive exposure via the food & beverage industry may wish to consider these two ETFs. Ultimately, however, these funds are not for every investment portfolio. Their relatively high expense ratios, focus on the food & beverage industry, and long-term underperformance relative to the S&P 500 mean these funds’ appeal will remain limited to investors seeking exposure to this niche of the stock market. PBJ has offered better long-term performance; however, income-oriented investors may value FTXG’s higher dividend yield.

Jake Lerch has positions in Coca-Cola. The Motley Fool has positions in and recommends Freshpet, Monster Beverage, and Starbucks. The Motley Fool recommends Kraft Heinz and Kroger. The Motley Fool has a disclosure policy.