Dividend Strength Portfolio, Series 40
When it comes to investing for income and growth, investors have several choices.We
believe that companies that have shown a solid history of distributing dividends
to shareholders are a wise choice for prudent investors to consider as part
of their overall investment plan.
Due to the fact that 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,
in our opinion. Additionally, dividends have historically been one of the few constants in the world of
investing, contributing nearly half of the stock market’s total returns. According to Ibbotson Associates,
dividends have provided approximately 41% of the 10.16% average annual total return on the S&P 500
Index, from 1926 through 2017. The S&P 500 Index is an unmanaged index of 500 stocks used to
measure large-cap U.S. stock market performance. The index cannot be purchased directly by investors.
Portfolio Selection Process
Through our selection process we seek to find the stocks that we believe have
the best prospects for above-average total return.
Identify the Universe
begin with the companies listed in the S&P
1500 Index and eliminate those companies that
do not meet our investment criteria. These
criteria are designed to identify companies with
the following qualities:
- Well-capitalized with strong balance sheets.
- Record of financial strength and profit
- A history of dividend payments with the
ability to generate dividend growth.
Examine Historical Financial Results
The next step in our process is to look for those companies that have earned
a net cash flow return on investment that is above the average of their peers.Historically,
companies that have increased their cash flows at a higher rate have rewarded
shareholders with superior total returns.
Select Companies with Attractive Valuations for the Portfolio
The final step in our process is to select companies based on the fundamental analysis of our
team of research analysts.The stocks selected for the portfolio are those that meet our
investment objectives, trade at attractive valuations, and in our opinion, are likely to exceed
market expectations of future cash flows.
This unit investment trust seeks above-average total return through a combination of capital appreciation and dividend income; however, there is no assurance the objective will be met.
|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.
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.
You should be aware that the portfolio is concentrated in stocks in both the consumer products
and industrials sectors 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. The companies engaged in the
industrials sector are subject to certain risks, including a deterioration in the general state of the
economy, intense competition, domestic and international politics, excess capacity and changing
An investment in a portfolio containing equity securities of foreign issuers is subject to additional
risks, including currency fluctuations, political risks, withholding, the lack of adequate financial
information, and exchange control restrictions impacting foreign issuers.
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 available information.
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.
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.