Most dividend stocks and exchange traded funds have either kept pace with or slightly lagged behind the broader market, while enticing investors with generous yields. The iShares Dow Jones Select Dividend ETF (NYSEArca: DVY), on the other hand, has been outperforming the S&P 500.

DVY is up 15.8% year-to-date, 20.7% over the past year and an average 5.5% in the last five years. In comparison, the S&P 500 Index has gained 14.0% so far this year, 18.7% in the last year and an average 5.0% over the past five years. [Dividend ETFs for 2013]

Along with its outperformance, DVY sports a decent 3.4% 12-month yield.

The iShares Dow Jones Select ETF tries to reflect the performance of the Dow Jones U.S. Select Dividend Index, which is comprised of the highest-yielding stocks in the Dow Jones U.S. Index but have also passed a rigorous screen, including a current dividend per-share ratio greater than or equal to its five-year average, a five-year average payout ratio of 60%, dividends need to be paid each year over the past five years and an average 200,000 shares traded per day. [‘Dividend Dogs’ ETF Beating the S&P 500]

“To reduce the risk of dividend cuts, this fund excludes firms with current dividend/share ratios lower than their five-year average and firms that have paid out more than 60% of their earnings over the past five years,” according to Morningstar analyst Michael Rawson. “Five years is roughly the length of a typical business cycle, so the fund can pile into industries and companies that have ridden high on a cyclical upswing, only to come crashing down on the downswing.”

DVY comes with a “deeper contrarian tilt than many of the other dividend funds out there,” Rawson added.

The fund’s sector allocations make it a little more vulnerable to business cycles. Sector allocations include utilities 31.0%, consumer goods 16.7%, industrials 14.8%, financials 10.7%, basic materials 5.8%, consumer services 5.3%, oil & gas 4.9%, technology 3.2% and telecom 2.5%.

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