Richard Bernstein Advisors Global Dividend Kings^®, Series 49

The Dividend Attraction

In the current economic climate, investors may have more income investment choices as bond yields have risen over the last several years (see Chart 1). However, taking a yield-based approach to equity investing may be a suitable pathway for those investors seeking total return through a combination of growth and income.

The Importance of Dividends

Dividends have traditionally been one of the few constants in the world of investing, helping to buffer volatility in both good and bad markets. When markets decline, dividends have the potential to offset losses, and when markets rise, dividends have the potential to enhance returns.

A dividend is a payment from a company’s earnings. Since corporations are not obligated to share their earnings with stockholders, dividends may be viewed as a sign of a company’s profitability as well as management’s assessment of the future.

Global Demographics¹

The global population was projected to have surpassed 8 billion in November 2022 and is estimated to reach approximately 9.7 billion in 2050. By 2050, the share of the population aged 65 or older is projected to be more than twice the number of children under five years old and approximately the same as the number of children under 12 years of age. The share of the global population 65 and older is projected to rise from 10% in 2022 to an estimated 16% in 2050. With more investors spending more years in retirement, we believe demand for dividend income will increase.

A Global Approach to Dividends

Diversification is one of the principal advantages of global investing. As of January 31, 2024, the market value of all U.S. equities stood at $51.8 trillion, or approximately 46.7% of the world’s total equity market capitalization, according to Bloomberg. By investing solely in the U.S. equity market, investors exclude a major portion of the world’s investment opportunities and some of the best companies in the world, in our opinion. In addition, consider that in 12 of the 30 calendar years from 1994 to 2023, the MSCI World ex USA Index outperformed the S&P 500 Index. It is important to note that diversification does not guarantee a profit or protect against loss.

By investing a portion of your portfolio outside the U.S., you may significantly expand your investment choices and participate in the long-term growth potential of foreign companies. In addition, dividend yields have typically been higher overseas, as shown in Chart 2. It is important to note that there can be no assurance that companies will declare dividends in the future or that, if declared, they will remain at current levels or increase over time.

The Richard Bernstein Advisors Global Dividend Kings^® Portfolio is a unit investment trust (UIT) focused on total return through a combination of dividend income and capital appreciation. The stocks are selected for the trust by Richard Bernstein Advisors (RBA) using a comprehensive process and held for approximately two years. A UIT is an investment vehicle which consists of a professionally selected unmanaged portfolio of securities which are held for a predetermined period of time. The value of the units of the trust will fluctuate each day with the value of the underlying securities; therefore it is possible to lose money by investing in the trust. There can be no assurance that the trust objective will be achieved. In addition, there is no guarantee that the issuers of the securities included in the portfolio will declare dividends in the future or that, if declared, they will either remain at current levels or increase over time.

A Disciplined Approach To Yield

RBA starts with the companies listed on the MSCI ACWI Index. This index captures large- and mid-cap representation across 23 developed and 24 emerging market countries. The index covers approximately 85% of the global investable equity market.

From this universe, RBA then screens for companies that have increased their trailing 12-month dividend each year for the previous 5 years. Special dividends are not included as they are typically one-time payments. The highest yielding stocks are removed, as they tend to be most susceptible to dividend cuts. This screening process generally results in 200 to 500 stocks.

RBA then uses a proprietary optimization method to weight the stocks. This final step attempts to reduce the volatility of the overall portfolio, while maximizing the yield. Thus, the strategy attempts to reduce risk in two ways: First, RBA screens for consistent dividend growth. Second, RBA uses a proprietary weighting method which strives to reduce overall portfolio volatility. From the initial universe of over two thousand, the resulting optimally weighted portfolio consists of less than 100 names. The trust will invest in U.S. listed securities of domestic and foreign companies, American Depository Receipts (ADRs) or Global Depository Receipts (GDRs) of foreign companies, and foreign listed securities.

You should consider the portfolio's investment objectives, risks, and charges and expenses carefully before investing. Contact your financial professional or call First Trust Portfolios L.P. at 1.800.621.1675 to request a prospectus, which contains this and other information about the portfolio. Read it carefully before you invest.

Risk Considerations

An investment in this unmanaged unit investment trust should be made with an understanding of the risks involved with owning common stocks, such as an economic recession and the possible deterioration of either the financial condition of the issuers of the equity securities or the general condition of the stock market.

Certain of the securities in the portfolio are issued by Real Estate Investment Trusts (REITs). Companies involved in the real estate industry are subject to changes in the real estate market, vacancy rates and competition, volatile interest rates and economic recession.

Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. issuers.

An investment in a portfolio containing mid-cap companies is subject to additional risks, as the share prices of certain mid-cap companies are often more volatile than those of larger companies due to several factors, including limited trading volumes, products, financial resources, management inexperience and less publicly available information.

Large capitalization companies may grow at a slower rate than the overall market.

As the use of Internet technology has become more prevalent in the course of business, the trust has become more susceptible to potential operational risks through breaches in cybersecurity.

Ongoing armed conflicts between Russia and Ukraine in Europe and among Israel, Hamas and other militant groups in the Middle East have caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, the Middle East and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.

The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future variants of the disease.

The value of the securities held by the trust may be subject to steep declines or increased volatility due to changes in performance or perception of the issuers.

This UIT is a buy and hold strategy and investors should consider their ability to hold the trust until maturity. There may be tax consequences unless units are purchased in an IRA or other qualified plan.