Most people love animals. Coming home to a dog waiting there to happily greet you is one of the best feelings. Of course, there are plenty of different animals people have as pets to bring them happiness, whether a cat, fish, bird or even a horse. 67% of U.S. households—or 85 million families, own a pet, according to the American Pet Products Association (APPA).
With such a special place in people’s hearts, spending money to care for pets is an expense people gladly budget for. Americans spent a record $72.5 billion on their pets in 2018, according to the APPA. For context, that amount is up from $69.5 billion in 2017 and $66.7 billion in 2016. In 1996, Americans spent $21 billion on their pets, meaning in just over 20 years spending on pets has increased by more than $50 billion.
Americans Love Pets
Pet ownership is higher among millennials than the overall population, with 72% of them owning a pet, according to TD Ameritrade. Millennial pet owners account for 27% of overall pet owners in the U.S. They’re not shy about spending, with millennial dog owners spending an average of $1,285 per year, while millennial cat owners spend an average of $915 per year.
So where is all of this money going? Pets have to eat too, therefore the largest category is pet food. Pet food accounted for $29 billion of the total with sales of premium pet food outpacing generic pet food sales. The second-largest category is veterinary care, accounting for $18 billion in spending. Veterinary care is the fastest-growing segment with a growth rate of more than 6%. OTC medications and supplies, such as leashes, beds, and toys, is the third-largest category with $15 billion spent in 2018.
How To Invest
So besides owning a pet, which can bring unlimited happiness, how can you invest in this quickly growing sector?
The best way is through the ProShares Pet Care ETF, which appropriately has the ticker PAWZ. The ETF holds companies set to “benefit from the proliferation of pet ownership.” The ETF’s largest holdings are a mix of pet food manufacturers, retailers and pharmaceutical companies such as Freshpet, Dechra Pharmaceuticals, IDEXX Laboratories, and Chewy. The ETF, which was created in November 2018, has returned just over 9% since inception, with an expense ratio of 0.50% and a dividend yield of 0.82%.
Chewy is another company that stands out as an investment. The company, which is essentially the Amazon of the pet industry, was acquired by PetSmart in 2017 for $3.35 billion. PetSmart spun Chewy off last year through an IPO valuing the company at nearly $9 billion, with shares surging more than 60% on their first day of trading. Chewy, which is still about 70% owned by PetSmart, is currently valued at about $11 billion.
The PAWZ ETF is probably your best option to have exposure to the growing pet industry because it provides exposure to various companies covering all facets of pet ownership. With pet ownership unlikely to slow down anytime soon, this may be a great sector to invest in and maybe even make a few extra bucks to buy your dog a new toy.
Header image: petfoodindustry.com