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With the Consumer Staples Select Sect. SPDR (ETF)
Give A High Five For XLP
With that in mind, it makes sense that XLP, the largest consumer staples ETF by assets, is
Seasonal trends confirm that May is an ideal time to embrace the staples sector. Since 1999, the first full year of trading for the sector SPDR suite, XLP is the best-performing SPDR in May. XLP averages a gain of just over 1 percent in the
“Yet, we think investors should look to the sector for more than seasonal reasons. Although adverse foreign currency exposure will limit EPS growth in 2016, to just 2.6 percent, we expect currency pressures to moderate as the year progresses. Third and fourth quarter 2016 growth, according to Capital IQ consensus, is projected to be 6.3 percent and 9.7 percent,” said S&P Capital IQ in a note out Monday.
Another reason investors are fans of staples stocks and ETFs like XLP are dividends. XLP sports a dividend yield of nearly 2.4 percent, or more than 50 basis points above where 10-year Treasury yields were on Monday. S&P Capital IQ has Buy or Strong Buy ratings on 17 of the 37 consumer staples stocks in the S&P 500.
“S&P Global Market Intelligence equity analyst Joseph Agnese sees revenue growth supported by improved pricing power, aided by expanded marketing and R&D budgets, and more favorable volume trends. Further, he thinks operating margin expansion is likely to be achieved due to favorable commodity costs, productivity improvements, and other cost cutting initiatives. With strong and historically stable free cash flow generation Agnese sees ongoing share repurchase activity,” said the research firm.
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