This ETF using a decades-old simple trading strategy is keeping investors in the black this year

Published Wed, May 11 20229:23 AM EDTUpdated Wed, May 11 20223:27 PM EDT

Jesse Pound @/in/jesse-pound @jesserpound

A decades-old simple trading strategy, with a slight tweak, has proven to be a great bet in one of the worst starts to the year Wall Street has ever seen. The Alps Sector Dividend Dogs ETF , which has more than $1 billion in assets under management and trades under the ticker SDOG, is up 1.1% year to date. That may be a modest return in a vacuum, but it is dramatically better than the 16% decline for the S & P 500. The fund is a twist on the "Dogs of the Dow" investing theory, which calls for investors to bet on the Dow stocks with the highest dividend yields each year. The Alps fund applies that to the S & P 500, picking the five stocks with the highest yields in each sector, excluding real estate, and is equal weight by sector and stock. "At a high level, it's designed to be simplistic. And it's designed to be an easy story for investors to understand and for an adviser to tell their client," said Paul Baiocchi, chief ETF strategist at SS & C Alps Advisors. Dividend stocks in general have become relative winners in 2022, as investors look to shift into assets that are seen as less risky and for steady income to offset inflation. Some of the fund's top holdings as of May 9 include some of the best large stocks of the year, including Valero , Kraft-Heinz and Bristol-Myers Squibb . Source: SS & C Alps In addition to including some of the year's best stocks, a big part of the strategy's success in 2022 has been because it's avoided exposure to some of the hardest hit sectors, like tech and communication services, Baiocchi said. "The reality is that it's a combination of both that sector difference and the differentiation in allocation to some of the key stocks within a given sector," Baiocchi said. The Alps fund, which has an expense ratio of 0.4%, is turned over once a year, with the company screening for the high yield stocks in every sector. It is also adjusted on a monthly basis to bring stocks and sectors back to equal weight. The fund also pays a dividend itself. In March, it distributed a bit more than 53 cents per share, which would result in a dividend yield of just under 4% based on Tuesday's closing price. To be sure, the success of dividend stocks in 2022 is a change from recent history, and the long-term returns of the Alps fund trail those of the S & P 500 Total Return Index.

People walk along Wall Street near the New York Stock Exchange on March 08, 2022 in New York City.

Spencer Platt | Getty Images

A decades-old simple trading strategy, with a slight tweak, has proven to be a great bet in one of the worst starts to the year Wall Street has ever seen.