Consumer staples are an essential part of every economy. These companies provide goods that most people consume daily, like food and groceries, clothing, and hygienic products.
Since societies have moved away from self-sufficiency, we rely on these consumer staples companies to provide our daily necessities.
Our reliance on these products means there will always be a demand for them. This makes investing in consumer staples companies a relatively safe investment.
Picking individual stocks can be difficult, but buying into the best consumer staples ETFs provides exposure to global brands in one convenient fund.
Consumer Staples ETFs and stocks often pay a generous dividend yield. Many of the S&P 500 Dividend Aristocrats are consumer staples companies. These include stocks for Procter and Gamble, the Coca-Cola Company, and Johnson & Johnson.
One downside of investing in consumer staples companies is that they are mature, blue-chip value stocks. This means there is limited growth compared to sectors like technology stocks. This is why these investments are offset with a high dividend yield.
This article will review and compare 3 of the top consumer staples ETFs in Canada for April 2024.
Best Consumer Staples ETFs in Canada for 2024
- iShares S&P/TSX Capped Consumer Staples Index ETF (XST.TO)
- BMO Global Consumer Staples Index ETF (Hedged to CAD) (STPL.TO)
- Vanguard Consumer Staples ETF (NYSEARCA: VDC)
Here are some key facts about this ETF:
- Ticker Symbol: XST.TO
- Inception Date: April 12, 2011
- Number of Holdings: 11
- MER: 0.61%
- Distribution Yield: 0.64%
- Distribution Frequency: Quarterly
- 5-Year Returns: 11.83%
The iShares S&P/TSX Capped Consumer Staples Index ETF holds 11 different Canadian consumer staples companies. This Blackrock consumer staples ETF is designed to track the S&P/TSX Capped Consumer Staples Index.
Since XST’s inception in 2011, shareholders have received cumulative returns of 387.94%. This is an impressive return that does not even take into account dividend reinvestment.
The top holdings in XST are Alimentation Couche Tard Inc (ATD.TO), Loblaw Companies Ltd (L.TO), and Metro Inc. (MRU.TO). These three stocks account for more than 60% of the weighted allocation in the XST ETF.
2. BMO Global Consumer Staples Index ETF (Hedged to CAD)
Here are some key facts about this ETF:
- Ticker Symbol: STPL.TO
- Inception Date: April 7, 2017
- Number of Holdings: 152
- MER: 0.40%
- Distribution Yield: 2.29%
- Distribution Frequency: Quarterly
- 5-Year Returns: 6.92%
This BMO consumer staple ETF is designed to replicate the FTSE Developed ex Korea Consumer Staples Capped 100% Hedged to CAD Index. It holds 152 global consumer staples companies, with a 66.36% weighted allocation to US stocks. Just 0.53% of the stocks are Canadian companies.
STPL.TO has a top-heavy sector allocation, with Food and Staples Retail leading the way accounting for 31.84% of the fund. A close second is the Beverages sector, with 26.54% of the fund.
The top holdings in STPL.TO is very recognizable among global consumers. They are Procter & Gamble, Nestle SA, and PepsiCo Inc. These three stocks account for nearly 27% of the weighted allocation in STPL.TO.
3. Vanguard Consumer Staples ETF
Here are some key facts about this ETF:
- Ticker Symbol: NYSEARCA: VDC
- Inception Date: January 26, 2004
- Number of Holdings: 101
- MER: 0.10%
- Distribution Yield: 2.30%
- Distribution Frequency: Quarterly
- 5-Year Returns: 10.06%
This is the only American-listed ETF on this list: the Vanguard Consumer Staples ETF. It holds 101 American consumer staples companies.
The fund itself has returned a total of 488.5% since its inception, with an average annual return of about 9.68%.
This Vanguard consumer staples ETF holds some of the strongest brands in America. The top three holdings in VDC are Procter & Gamble, the Coca-Cola Company, and PepsiCo Inc.
How To Buy Consumer Staples ETFs in Canada in 2024
Canadian investors can purchase any of the consumer staples ETFs mentioned earlier at a Canadian brokerage. If you want to save money and hold onto more of your long-term gains, consider signing up for one of Canada’s leading discount brokerages.
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What are Consumer Staples ETFs?
Consumer Staples ETFs are funds that hold the stocks of global consumer staples companies. These funds are managed by major financial companies like Blackrock and Vanguard.
These consumer staples companies provide consumers around the world with daily essential products. Some sectors included in the consumer staples industry are Food and Beverage, Household Products, and even Tobacco.
Investing in a consumer staples ETF in Canada is a good way to gain international exposure without paying foreign exchange fees.
How To Choose Consumer Staples ETFs in Canada
As with most ETFs, finding a nice balance of capital appreciation, dividend yield, and low MER is the best way to choose the best consumer staples ETF.
You should also decide on which region you would like to invest in. For example, the three consumer staples ETFs we discussed all have different demographics.
XST.TO is an all-Canadian fund, STPL.TO holds global companies, and VDC only holds American stocks.
Top Consumer Staples Stocks in Canada
- Alimentation Couche-Tard Inc. (ATD.TO)
- Loblaws Companies Limited (L.TO)
- George Weston Limited (WN.TO)
- Dollarama Inc (DOL.TO)
- Metro Inc. (MRU.TO)
- Molson Coors Canada Inc. (TPX.B.TO)
- Saputo Inc (SAP.TO)
- Empire Company Limited (EMP.A.TO)
- Premium Brands Holding Corporation (PBH.TO)
- Maple Leaf Foods Inc. (MFI.TO)
Downsides of Consumer Staples ETFs
The downside of holding consumer staples ETFs is that the value of the fund is dictated by consumer demand. In times of recession or economic instability, these companies could see a decline in sales.
Most consumer staples stocks are considered blue-chip value stocks. This means that you will not see much in the way of growth or capital appreciation. Consumer Staples stocks and ETFs are considered a source of dividend cash flow and stability for your portfolio.
Methodology for Choosing Consumer Staples ETFs in Canada
As mentioned, the sweet spot of a high dividend yield, long-term growth, and a low MER is ideal for choosing the best consumer staples ETFs in Canada.
If you want worldwide exposure, look for a global consumer staples ETF like STPL.TO. Focusing on American consumer staples companies can be beneficial since most of them also have a significant global market share.
Just be sure to educate yourself on the impact of owning US-listed stocks or ETFs in a registered account like the TFSA.
FAQs
Yes, the Vanguard Consumer Staples ETF. Unfortunately for Canadian investors, this Vanguard consumer staples ETF only trades on the US exchanges. You will need to pay for this ETF in US Dollars, and if you hold it in a TFSA, any dividends earned will be subject to the 15% withholding tax from the IRS.
Investing in a consumer staples ETF has its ups and downs. You will not see the same level of growth, but you will be provided with a solid dividend and portfolio stability. Buying ETFs also provides you with exposure to a basket of stocks. This removes the need for investors to select just one or two stocks to invest in.
Related: Top Investment Firms in Canada.
