XLP vs. VDC: Which Consumer Staples ETF Is the Better Buy?
Dividend yield and portfolio concentration set these two funds apart for investors.
By Andy Gould
The State Street Consumer Staples Select Sector SPDR ETF (XLP 0.45%) and the Vanguard Consumer Staples ETF (VDC 0.40%) offer similar defensive exposure, but XLP has lower fees and a higher yield, while VDC diversifies across many more holdings.
Investors seeking shelter from market volatility often turn to consumer staples, which provide essential goods like food, beverages, and personal hygiene products. These funds are sometimes used as core components of a low-volatility portfolio strategy.
Snapshot (cost & size)
Beta measures price volatility relative to the S&P 500; beta is calculated from five-year monthly returns. The 1-year return represents total return over the trailing 12 months. Dividend yield is the trailing-12-month distribution yield.
With an expense ratio of 0.08%, XLP is slightly cheaper than VDC. XLP also offers a more attractive payout, with a dividend yield nearly 0.5 percentage points higher than VDC’s.
Performance & risk comparison
What's inside
Launched in 1998, XLP concentrates on U.S. companies within the S&P 500, specifically targeting firms involved in essential goods distribution, retail, and manufacturing. It maintains a slim portfolio of just 35 holdings, and its largest positions include Walmart (WMT 0.72%) at 10.8%, Costco Wholesale (COST 1.29%) at 9.1%, and Procter & Gamble (PG 0.12%) at 7.1%.
Launched in 2004, VDC tracks a broader benchmark representing the consumer staples industry. It offers exposure to 103 holdings, nearly triple the count of XLP. Its three largest positions are the same as XLP’s -- with Walmart at 14.5%, Costco Wholesale at 11.8%, and Procter & Gamble at 8.7%.
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What this means for investors
Choosing between XLP and VDC ultimately comes down to what you want from a defensive ETF -- concentration or breadth.
XLP's tighter portfolio of 35 stocks means it leans heavily on megacap names like Walmart, Costco, and Procter & Gamble -- with those three stocks alone accounting for 27% of XLP’s holdings. That's not a bad thing: these are among the most battle-tested companies in the market, with reliable cash flows and long dividend histories. A slightly higher yield and marginally lower expense ratio give XLP a modest edge for income-focused investors.
VDC, on the other hand, casts a wider net. With 103 holdings -- nearly three times as many as XLP -- it spreads exposure across a deeper slice of the staples sector, including mid-sized companies that XLP leaves out entirely. For investors who prefer not to have so much riding on a handful of giant retailers, that added diversification can be reassuring, especially during periods when mega-cap consumer names are struggling.
It’s worth noting that the consumer staples sector has historically held up better than the broader market during downturns. Both funds carry similar betas of around 0.55, meaning they tend to move much less than the S&P 500 in either direction -- making them natural buffers during volatile markets. That low-drama profile is exactly what many long-term investors are looking for when they add a staples fund to the mix.
Neither ETF is the wrong choice here. If cost and income are an investor’s priority, XLP has a slight edge. If broader sector coverage matters more, VDC is probably the better fit.