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A Consumer Staples ETF Draws A Crowd

ETF Professor

In the latest sign investors are renewing their affinity for defensive sectors, some consumer staples exchange traded funds are seeing significant inflows this month.

For example, the Consumer Staples Select Sector SPDR (NYSE: XLP), the largest staples ETF by assets, is luring investors in a big way this month. The renewed interest in staples ETFs is curious when considering investors have favored higher beta sectors for most of this year and XLP is up just 9.4 percent, less than half the return offered by the S&P 500.

December, historically, is not the best time of year to own the staples sector. While XLP does not average a December gain, its performance in the last month of the year is usually a negligible gain, making it one of the two worst sector SPDR ETFs to own this month. 

Cash Flow

XLP has been adding new assets at an impressive clip this month. 

“More than $1 billion has entered the fund since December began, a significant amount considering that the asset base in the fund including these inflows is still a bit shy of $10 billion overall,” Street One Financial Vice President Paul Weisbruch said in a Monday note. “Like the SPX itself, this fund is within shouting distance of another 52-week high at present levels, and trading volume in the product has been elevated for much of the month of December thus far.” 

To be precise, heading into Monday, XLP had seen December inflows of $1.03 billion. Only two other ETFs have added more new assets this month. XLP now has $9.4 billion in assets under management, indicating that its December asset-gathering acumen has been a boon for the ETF's size.

Interestingly, while investors are pouring into XLP, the opposite is true of its Vanguard rival. The Vanguard Consumer Staples Index Fund (NYSE: VDC) has suffered December outflows of $32.1 million.

Yield Play

In addition to its defensive nature, the consumer staples sector averages above-average dividend yields, explaining why conservative investors often favor the group.

“Yield-conscious portfolio managers have often traditionally looked at XLP and related ETFs, as we note the fund’s yield is currently 2.6 percent — as compared to, say, 1.8 percent on the S&P 500,” Weisbruch said. 

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