Is iShares US Consumer Staples ETF a Better Buy Than Invesco Food & Beverage?

The iShares U.S. Consumer Staples ETF (NYSEMKT:IYK) offers broader sector exposure and a lower cost profile compared to the more specialized Invesco Food & Beverage ETF (NYSEMKT:PBJ).

Investors seeking stability often turn to consumer defensives to anchor a portfolio. While the Invesco Food & Beverage ETF targets a specific subset of industry producers using a dynamic index, the iShares U.S. Consumer Staples ETF provides a more traditional, diversified approach to the broader U.S. market.

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-yr return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.

The iShares U.S. Consumer Staples ETF is more affordable with a 0.38% expense ratio, while Invesco Food & Beverage ETF charges 0.61%. Additionally, the iShares fund provides a higher payout for income-seeking investors.

Performance & risk comparison

What's inside

The iShares U.S. Consumer Staples ETF provides broad exposure with 53 holdings, primarily in Consumer Defensive (82%), Healthcare (14%), and Basic Materials (2%). Its largest positions include Procter & Gamble (NYSE:PG) at 12.97%, Coca-cola (NYSE:KO) at 12.95%, and Philip Morris International Inc (NYSE:PM) at 11.35%. Launched in 2000, iShares U.S. Consumer Staples ETF has paid $1.90 per share over the trailing 12 months, which on its recent ~$74.19 share price works out to a 2.6% yield.

In contrast, Invesco Food & Beverage ETF follows a narrower index of 31 companies involved in the production and distribution of food and agricultural products. Its sector tilts include Consumer Defensive (78%), Consumer Cyclical (8%), and Industrials (5%). Top holdings include Coca-Cola Co. at 5.48%, Starbucks Corp (NASDAQ:SBUX) at 5.27%, and Monster Beverage Corp (NASDAQ:MNST) at 5.23%. Launched in 2005, Invesco Food & Beverage ETF has paid $0.61 per share over the trailing 12 months, which on its recent ~$47.03 share price works out to a 1.3% yield.

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Which looks like the better buy?

There is not much of a comparison here. The iShares U.S. Consumer Staples ETF wins on just about every count. It has better performance over every time period, including year-to-date, one-year, three-year, five-year, and 10-year. Year-to-date, IYK is up about 10%.

The iShares ETF also pays out a higher dividend yield and has a lower expense ratio. These are two reasons it has managed to outperform over the years. But it is also more diversified, covering a wider swath of the consumer staples sector while the Invesco Food and Beverage ETF focuses just on one part of the consumer staples sector, food and beverage stocks.

The iShares U.S. Consumer Staples ETF includes most of the stocks in the Invesco ETF, if not all of them, as 55% of the portfolio is in food stocks. But it also pulls stocks from other industries like household and personal products, healthcare equipment and services, retail and distribution, and materials.

A good consumer staples ETF should be a must in any portfolio for the balance it provides and the dividend income that can help boost returns during downturns. IYK is a certainly a solid choice to fill that void.

Dave Kovaleski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Monster Beverage and Starbucks. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.