S&P Dividend Aristocrats Buy-Write, Series 12
The S&P Dividend Aristocrats Buy-Write Portfolio
invests in a fixed portfolio of common stocks
which are selected from the S&P 500 Dividend
Aristocrats Index. The index consists of companies
from the S&P 500 Index that have increased dividends
every year for at least 25 consecutive years.
Simultaneously, the portfolio sells a Long-Term Equity
AnticiPation Securities (LEAPS®) call option against
each position. The writing (selling) of a call option
generates income in the form of a premium paid by
the option buyer. The portfolio invests this income in
U.S. Treasury notes and the interest received from the
notes is paid to unit holders periodically.
You should be aware that a product which includes
writing call options may not be suitable for all
investors. It may not be appropriate for investors
seeking above-average capital appreciation. Before
investing, you should make sure you understand the
risks of this type of product, and whether it suits your
current financial objectives.
Why Invest In Companies With A History Of Growing Dividends?
QUALITY | Companies that have been able to consistently grow their dividend have a tendency to be
high quality compared to those of the broader market in terms of earnings quality and leverage, in our
opinion. A company’s ability to reliably increase its dividend for years, or even decades, can be an
indication of its financial strength or discipline.
BUFFER AGAINST MARKET VOLATILITY | Dividend growth companies may be attractive to investors
looking for disciplined companies that can endure difficult market and economic environments. These
companies typically feature healthy balance sheets and consistent cash flows that provide plenty of
capital to effectively operate their business and fund a growing dividend.
ADDRESS THE POTENTIAL RISKS ASSOCIATED WITH RISING RATES | Unlike high dividend yield
strategies which tend to be concentrated in companies from certain sectors that could come under
pressure during periods of rising rates, dividend growth strategies tend to be more diversified and able
to provide increased exposure to sectors that could become more desirable with improving economic
activity and rising rates.
Illustrative Market Scenarios
STOCK PRICES INCREASE ABOVE THE LEAPS’ EXERCISE PRICE | The LEAPS are exercised and the
underlying stock shares are sold at the strike price. Profits are limited to the premium income received
from writing the LEAPS, dividends received from the common stocks prior to their sale from the
portfolio, interest received from the U.S. Treasury Obligations, plus the difference between each common
stock’s initial price and their strike price. Investors will forgo any dividends paid on the common stocks
subsequent to their sale from the portfolio and any gain in the underlying stock price after the stock is
sold. It is important to note that writing covered calls limits the appreciation potential of the underlying
STOCK PRICES REMAIN STABLE | The LEAPS expire worthless and the portfolio still owns the
common stock shares. Profits are limited to the premium income received from writing the LEAPS, plus
dividends from the stocks, as well as interest received from the U.S. Treasury Obligations.
ST0CK PRICES DECREASE | The LEAPS expire worthless and the portfolio still owns the common
stock shares. The break even on the stocks is lowered by the premium income received from writing the
LEAPS. In addition, the portfolio will receive dividends from the common stocks, and interest from the
U.S. Treasury Obligations.
This unit investment trust seeks income, with capital appreciation as a secondary
objective. There is, however, no assurance that the objectives will be achieved.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
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.
The S&P 500 Dividend Aristocrats Index is a product of S&P Dow Jones Indices LLC or its affiliates
("SPDJI") and has been licensed for use by First Trust Portfolios L.P. Standard & Poor's® and S&P®
are registered trademarks of Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a
registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these
trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by First
Trust Portfolios L.P. The S&P Dividend Aristocrats Buy-Write Portfolio is not sponsored, endorsed,
sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties
make any representation regarding the advisability of investing in such product nor do they have
any liability for any errors, omissions, or interruptions of the S&P 500 Dividend Aristocrats Index.
An investment in this unmanaged unit investment trust should be made
with the understanding of the risks involved with common stocks, LEAPS, and U.S. Treasury notes.
Common stocks are subject to 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.
The value of U.S. Treasury notes will be adversely affected by decreases in bond prices and
increases in interest rates.
The value of the LEAPS is deducted from the value of the portfolio assets when determining the value of a
unit. As the value of the LEAPS increases, it has a more negative impact on the value of the units. The value
of the LEAPS will also be affected by changes in the value and dividend rates of the underlying stocks, an
increase in interest rates, a change in the actual and perceived volatility of the stock market and the stocks
and the remaining time to expiration. Additionally, the value of the LEAPS does not increase or decrease at
the same rate as the underlying stock. However, as the LEAPS approach their expiration date, their value
increasingly moves with the price of the stock.
Options are subject to various risks including that their value may be adversely affected if the market for
the option becomes less liquid or smaller. In addition, options will be affected by changes in the value and
dividend rates of the stock subject to the option, an increase in interest rates, a change in the actual and
perceived volatility of the stock market and the common stock and the remaining time to expiration.
You should be aware that the portfolio is concentrated in stocks in the consumer staples sector which involves
additional risks, including limited diversification. The companies engaged in the consumer staples sector are
subject to global competition, changing government regulations and trade policies, currency fluctuations,
and the financial and political risks inherent in producing products for foreign markets.
One of the common stocks held by the trust is issued by a foreign entity. An investment in a portfolio which
includes foreign securities should be made with an understanding of the additional risks involved, such
as currency fluctuations, political risk, the lack of adequate financial information and exchange control
restrictions impacting foreign issuers.
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.
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
The recent outbreak of a respiratory disease designated as COVID-19 was first detected in China in December 2019. The global economic impact of the COVID-19 outbreak is impossible to predict but is expected to disrupt
manufacturing, supply chains and sales in affected areas and negatively impact global economic growth prospects. The COVID-19 outbreak has also caused significant volatility and declines in global financial markets, which
have caused losses for investors. The impact of the COVID-19 outbreak may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
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.