Invesco PSL's Rising Dividends Spotlight Momentum in Consumer Staples

The Invesco DWA Consumer Staples Momentum ETF (NASDAQ: PSL) has drawn investor attention following its announcement of a $0.2756 per-share quarterly distribution for Q3 2025, marking its latest step in a pattern of dividend increases. This move underscores the fund's strategy of leveraging sector-specific momentum to deliver income and growth, even as its dividends have historically fluctuated. For income-focused investors willing to navigate volatility, PSL presents a compelling opportunity—particularly amid a consumer staples sector showing resilience in an uncertain economic climate.

Dividend Volatility Masks a Positive Trend

PSL's dividend history since 2023 has been uneven, with sharp swings in payouts (see ). However, recent quarters reveal a clearer upward trajectory. After a dip to $0.1013 in September 2024, dividends rebounded to $0.2084 in December 2024 and rose further to $0.2207 in March 2025. The latest Q3 2025 distribution of $0.2756—a 24.8% increase from March's level— signals a sustained recovery.

What drives this improvement? PSL's momentum-based strategy, which rebalances its portfolio quarterly to favor stocks demonstrating relative strength, has likely captured outperformance in key consumer staples names. For instance, holdings like Costco Wholesale (COST) and Church & Dwight (CHD) have shown resilience in inflationary environments, while Philip Morris International (PM) benefits from steady demand for tobacco products.

The Momentum Edge in Consumer Staples

PSL tracks the Dorsey Wright® Consumer Staples Technical Leaders Index, which selects 30-50 stocks from the NASDAQ US Benchmark Index based on price momentum. This approach differs from traditional sector ETFs, which often weight holdings by market cap. By focusing on relative strength, PSL aims to capitalize on companies gaining favor with investors, even in a sideways market.

This strategy has paid dividends (literally and figuratively). Despite the sector's modest growth profile, PSL's holdings have outperformed broad benchmarks in periods of rotation toward defensive stocks. For example, during the 2023-2024 period of Fed rate hikes, consumer staples—seen as recession-resistant—gained traction, aligning with PSL's momentum criteria.

Risks and Considerations

Investors must acknowledge PSL's risks. First, its 30%+ quarterly turnover means holdings are constantly shifting, which can lead to higher transaction costs and tax inefficiencies. Second, the fund's 0.60% expense ratio—moderate for actively managed ETFs—reduces net returns. Third, sector concentration in consumer staples introduces sensitivity to shifts in consumer spending or regulatory changes.

Moreover, PSL's beta of 0.73 suggests lower volatility than the broader market, but its dividend yield—currently 0.41%—remains modest compared to high-yield bonds or dividend aristocrats. However, the forward dividend yield of 0.80% (as of early 2025) hints at potential upside if distributions stabilize.

Why Now Could Be the Time for PSL

The fund's recent performance and dividend trajectory suggest it's positioning itself for a potential upswing in consumer staples. With the U.S. economy showing signs of soft landing and inflation easing, defensive sectors like staples could attract inflows. Additionally, PSL's Morningstar Overall Rating of 4 stars (over 3 years) and its focus on momentum-driven outperformers give it an edge in capturing alpha.

For income investors, PSL's $90.9M in AUM and $4,390 average daily trading volume offer sufficient liquidity. However, those prioritizing steady dividends may prefer traditional staples ETFs like XLP, which boast higher yields but less dynamic strategies.

Final Take: A Momentum Play for Patient Investors

PSL isn't a “set-it-and-forget-it” income vehicle. Its dividend volatility and frequent rebalancing demand active oversight. Yet, for investors who can stomach short-term swings, PSL's blend of sector exposure and momentum-driven rebalancing makes it a nuanced tool for capturing growth in a stable sector.

Investment recommendation: Consider a small position in PSL as part of a diversified portfolio, especially if you believe consumer staples will outperform in a low-growth environment. Pair it with broader defensive holdings to mitigate sector-specific risks.

This comparison could highlight PSL's valuation relative to its peers, offering further insight into its appeal.

In sum, PSL's rising dividends and momentum-driven strategy position it as a worthwhile option for investors seeking both income and the potential for capital appreciation in a resilient sector.