Focus in on Consumer Staples Dividend Payers With These ETFs

Key Points

• Consumer staples stocks can make great dividend plays for their reliability even during shifting market conditions.
• With dividend yields as high as 8.90%, there are a number of unique consumer staples ETFs combining passive income with diversification.
• KXI and VDC are more generalized sector funds, while FXG uses a quant-based methodology to select stocks, and XLSI has a unique call options approach for added income.

When it comes to dividend plays, consumer staples stocks can be right up at the top—companies that generate reliable income regardless of market conditions. Consumer staples firms often enjoy pricing advantages, brand loyalty, and natural resistance to recessions. In turn, they may pay out healthy, sustainable dividends to investors, even if they may lack the capacity for price fluctuations that make it possible to win big returns.

While some investors may opt to hand-select individual dividend stocks, an exchange-traded fund (ETF) focused on consumer staples names may be a good option for passive income investors. While a small number of these funds have a specific dividend strategy, others offer a more generalized approach but might still pay out a compelling distribution nonetheless.

A New, Relatively Unknown Consumer Staples and Call Options Fund

First, a fund focused on the consumer staples sector that also includes income as a specified strategic goal: the State Street Consumer Staples Select Sector SPDR Premium Income ETF NYSEARCA: XLSI. XLSI is a newer fund, having only launched in July 2025, and it also stands out among other sector-focused funds for its active management approach—and, as a result, its relatively high annual fee of 0.35%.

The interesting aspect of XLSI is that it aims for dividend distributions, but not necessarily by targeting stocks with strong dividend yields. Rather, XLSI, gives exposure to a consumer staples-focused fund and then builds its own distributions through an overlayed call options strategy.

XLSI is up modestly year to date (YTD), but it pays a mighty dividend yield of 8.9%.

Investors may find that liquidity is a concern, though, as the niche fund has under $3 million in managed assets and substantially low trading volume.

High-Cost Fund With Unique Methodology, But Dividend Yield Helps to Stand Out

First Trust Consumer Staples AlphaDEX Fund NYSEARCA: FXG takes an approach to the consumer staples sector governed by a quant-screened methodology that seeks to identify individual companies most likely to outperform their peers.

The result is a fairly evenly allocated collection of around 40 holdings, in which no single stock dominates the rest of the basket.

FXG is up about 7% YTD, which may or may not make its high expense ratio of 0.63% worthwhile. However, despite not being expressly focused on dividends, FXG also offers a dividend yield of 2.7%, which is a compelling reason for passive income seekers to consider this fund. While FXG has a significantly higher asset base compared to XLSI above, at more than a quarter of a billion dollars, it is still quite lightly traded compared to more generalized sector funds.

2 Other Broad Consumer Staples Funds With Surprisingly Strong Dividends

Ultimately, some investors looking for passive income plays may find that a more diversified fund provides the right balance. The iShares Global Consumer Staples ETF NYSEARCA: KXI holds close to 100 positions in consumer staples stocks from developed markets, giving it access to a wider universe of names than many other ETFs focused on this sector.

Still, the largest positions in the portfolio approach 10% of the overall basket, so the large number of holdings doesn't necessarily mean this is the most diversified fund available.

Investors will spend a bit more for KXI than other sector funds because of its international purview, as the fund has an expense ratio of 0.39%. Its 5% YTD performance comes in slightly below other funds on this list, but the global exposure may provide some insulation against macro factors specific to the United States. It also offers a dividend yield of 2.2% to appeal to passive income fans.

With $8 billion in managed assets and an expense ratio of 0.09%, the stalwart Vanguard Consumer Staples ETF NYSEARCA: VDC is both the largest and the cheapest fund on this list by a wide margin.

For a broad sector fund, its portfolio of just over 100 names is perhaps not as deep as some investors may expect. It is also heavily weighted toward specific names like Walmart Inc. NASDAQ: WMT and Costco Wholesale Corp. NASDAQ: COST, which together make up about a quarter of assets.

For the price, though, it's hard to beat VDC's performance and dividend relative to alternatives in the sector. This fund has returned 8% YTD, the best performance in 2026 so far among the funds on this list, and also pays a dividend yield of 2.1%. Although not as high as other yields in the space, the combination of returns, low fee, and liquidity make VDC a strong contender.