Three Consumer Staples Stocks Outperform XLP in Key Areas

The Consumer Staples Select Sector SPDR Fund (XLP) is a popular choice for investors seeking defensive exposure and a decent dividend. However, a closer look at its largest holdings reveals that owning these individual stocks directly may be a better option.

XLP's top disclosed holdings include Walmart (10.80%), Costco (9.03%), Procter & Gamble (7.43%), Coca-Cola (6.85%), and Philip Morris International (6.13%). However, the ETF's blended yield is dragged down by low-yielding retailers like Costco and struggling packaged-food names.

Coca-Cola stands out as a growth story that XLP cannot match, with a 29.98% year-to-date return, triple that of XLP. The company's second-quarter report beat estimates, driving revenue up 6.7% year over year, and global unit case volume grew 5%. Management raised full-year guidance to organic revenue growth of roughly 5% and comparable EPS growth of 9% to 10%, while the dividend just stepped up to $0.53 quarterly.

Procter & Gamble is another example, with a yield of 2.98% and a forward P/E down to 20, a rare discount for a company that just paid its 70th consecutive annual dividend increase. The company's FY2026 free cash flow reached $15.84 billion, up 12.74%, and management plans roughly $10 billion in dividends and $5 billion in buybacks in FY2027.

Altria Group yields 6.27% and trades at a forward P/E of 12, having just raised its quarterly dividend to $1.11. The company has returned nearly $3.9 billion to shareholders through dividends and buybacks in the first half alone, narrowing 2026 adjusted EPS guidance to $5.61 to $5.72.