S&P Dividend Aristocrats Buy-Write, Series 5
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 advisor
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.
“Standard & Poor’s”, “S&P”, “S&P 500” and “S&P Dividend Aristocrats” are trademarks of Standard
& Poor’s Financial Services LLC (“S&P”) and the trademarks have been licensed for use by S&P
Dow Jones Indices LLC (“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, S&P or their respective affiliates and none of such parties make any representation
regarding the advisability of investing in such product.
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.
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 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.
The value of U.S. Treasury notes will be adversely affected by decreases in bond prices and
increases in interest rates.
You should be aware that the portfolio is concentrated in stocks in the consumer products sector
which involves additional risks, including limited diversification. The companies engaged in the
consumer products industry 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.
An investment in a portfolio containing small-cap and mid-cap companies is subject to
additional risks, as the share prices of small-cap companies and 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
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.
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 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