W.E. Donoghue & Co., a US-based investment management firm, has rolled out a strategy index that seeks to deliver high income and reduced exposure to bear market cycles by switching allocations between high-yielding equities and short-term Treasuries.

W.E. Donoghue Power Dividend Index (Source: W. E Donoghue & Co., Inc.)

The W.E. Donoghue Power Dividend Index uses exponential moving-average crossovers to trigger allocations between an equally-weighted portfolio of stocks, as represented by the S-Network Sector Dividend Dogs Index (SDOGX), and 90-day US Treasury bills.

The index will be be published by S-Network Global Indexes and calculated by S&P Custom Indices.

The S-Network Sector Dividend Dogs Index employs a systematic approach to identify the five stocks in each of the ten S&P 500 sectors with the highest dividend yields. The approach is designed to combine the benefits of high dividend yield, sector diversification and equal weighting.

Jeff Thompson, Senior Vice President and Portfolio Manager at W.E. Donoghue & Co., said: “W.E. Donoghue is proud to deliver the Power Dividend Index with S-Network. As a pure yield index, the strategy has adapted and improved a traditional investment idea to deliver the potential for a better risk-adjusted return.”

Richard Phillips, Senior Index Analyst at S-Network, said: “The SDOGX provides unbiased exposure to the five stocks with the highest dividend yields in each of the ten sectors of the S&P 500, while the tactical overlay seeks to eliminate exposure to equities during bear market cycles.”

The index, which will likely be pitched as a potential underlying to providers of exchange-traded funds (ETFs), is appropriate for investors with a time horizon of five years or longer, as it can exhibit short-term volatility equal or potentially greater than the overall stock market.

While investors will have to wait before this index comes out in ETF format, investors are able to access the standard S-Network Sector Dividend Dogs Index via the ALPS Sector Dividend Dogs ETF (SDOG). This fund is listed on the NYSE Arca and comes with a Total Expense Ratio (TER) of 0.40%.