Which Consumer Staples Sector ETF Wins? XLP vs KXI Showdown

When it comes to investing in the consumer staples sector, two ETFs stand out as compelling options for different types of investors: the State Street Consumer Staples Select Sector SPDR ETF (XLP) and the iShares Global Consumer Staples ETF (KXI). Both track consumer staples sector companies—businesses providing everyday essentials like food, beverages, and household products—but they take fundamentally different approaches to achieving that exposure. This guide breaks down how these two stack up across the dimensions that matter most.

The Cost Factor: Why XLP’s Lower Fees Matter

The expense ratio difference between these two funds is striking. XLP charges just 0.08% annually, while KXI carries a 0.39% fee—nearly five times higher. For investors deploying $100,000, that translates to $80 in annual costs versus $390. Over decades, this seemingly small difference compounds significantly, eating into your total returns.

Beyond fees, asset under management (AUM) reveals something about fund liquidity and scale. XLP commands $14.6 billion in AUM, making it substantially larger than KXI’s $886.6 million. Greater size typically means tighter bid-ask spreads and easier position exits.

Income Comparison: Dividend Yields Under the Microscope

Income-focused investors should note the dividend yield gap. XLP delivers a 2.7% yield, outpacing KXI’s 2.3%. While the difference appears modest—just 0.4 percentage points—it compounds over time. On a $50,000 investment, that’s an extra $200 annually in dividend income from XLP.

Both funds offer respectable yields compared to the broader market, reflecting the defensive nature of consumer staples companies, whose earnings remain relatively stable across economic cycles.

Growth Trajectories: 5-Year Performance Breakdown

Here’s where the picture becomes more nuanced. Over the trailing five years, XLP generated a 36.2% total return, translating to a 6.4% compound annual growth rate (CAGR). KXI, meanwhile, posted a 28.1% return with a 5.1% CAGR.

However, both funds lagged the S&P 500’s impressive 14.6% five-year CAGR—a reminder that consumer staples sector investments prioritize stability over explosive growth. The sector’s defensive characteristics mean lower volatility but also lower upside during bull markets.

When measuring downside protection, both funds showed comparable maximum drawdowns. XLP experienced a -16.31% peak-to-trough decline, while KXI saw -17.43%, suggesting similar risk profiles during market corrections.

Geographic Exposure: Global vs. Domestic Focus

This represents the most significant strategic difference between the two funds. XLP maintains an almost entirely U.S.-focused portfolio, with approximately 100% of holdings in American stocks. Top positions include Walmart, Costco Wholesale, and Procter & Gamble—quintessential U.S. consumer staples names.

KXI, by contrast, provides genuine global diversification. Its regional allocation breaks down as roughly 59% U.S. stocks, 29% European exposure, 7% Asian holdings, and 5% from the rest of the world. This geographic spread means investors get exposure to international consumer staples leaders like Nestlé and Unilever alongside American heavyweights.

What’s Inside the Portfolios: Holdings Deep Dive

XLP holds 36 stocks, all rooted in the U.S. consumer staples sector. The portfolio is tightly focused, with iconic brands like Pepsi, Coca-Cola, and Target rounding out the top holdings alongside Walmart and Costco. There’s no sector drift or portfolio quirks—just pure, straightforward exposure to established U.S. consumer staples names.

KXI takes a broader approach with 96 holdings, achieving greater diversification through geographic spread. Its 97% allocation to consumer defensive sector assets reflects a clear strategic focus, with minor tilts toward consumer cyclical and financial services. Walmart and Costco again appear among top positions, but they share prominence with international names like Nestlé and Unilever, each representing significant portfolio weights.

Making the Choice: Which ETF Fits Your Strategy?

For income-seeking investors prioritizing lower fees and higher dividend yields, XLP emerges as the superior choice. Its 0.08% expense ratio, 2.7% yield, and superior five-year performance create a compelling case, particularly for those comfortable with U.S.-only exposure.

For investors seeking to reduce home-country bias and diversify across global consumer staples sector opportunities, KXI’s international reach justifies its higher expense ratio and slightly lower yield. The geographic diversification benefit becomes more valuable in periods when U.S. markets underperform relative to developed international markets.

Both funds offer attractive entry points for conservative portfolios prioritizing capital preservation over growth. The choice ultimately depends on your specific objectives: pure domestic exposure with lower costs (XLP) or global diversification with higher complexity (KXI).