Deep Value Dividend Opportunity Portfolio, Series 16
The Deep Value Dividend Opportunity Portfolio invests in 30 companies that have low estimated current year price-to-earnings (P/E) ratios in addition to above-average dividend yields. We believe
these companies may offer long-term investors an opportunity for capital appreciation and dividend income.
The Importance of P/E Ratios
The P/E ratio is considered the most common measure of a stock’s value. Stocks that have high P/E ratios
tend to be considered a higher risk investment than those with low P/E ratios, since a high P/E ratio often
signifies high earnings growth expectations. The current environment has led to certain companies being
undervalued, in our opinion. We believe there is opportunity in the U.S. stock market with the combination
of attractive valuations, rising earnings and ultra-low interest rates, which may benefit equities.
The Importance of Dividends
Dividends have historically been one of the few constants in the world of investing, and they
have had a significant impact on stock performance, contributing nearly half of the stock market’s
total return. According to Ibbotson Associates, dividends have provided approximately 40% of the
10.30% average annual total return on the S&P 500 Index from 1926 through 2020. Of course,
past performance is no guarantee of future results.
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
We begin with the companies listed in the S&P 1500 Index.
Screen the Universe
We then evaluate the companies in the universe based on market-capitalization,
the ratio of each stock’s current price to its estimated current year earnings, its
dividend payout and dividend yield ratios. These screens are designed to identify stocks with a low P/E ratio and the ability to
sustain its dividend yield.
Select the Portfolio
The final step is to select the 30 stocks
for the portfolio subject to a maximum of approximately 30% in a single sector. The stocks are
approximately equally weighted within the portfolio.
Portfolio Objective
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 objective, 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.
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.
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.
The COVID-19 global pandemic has resulted in major disruptions to economies and markets around the world. Financial markets have experienced extreme volatility and severe losses, negatively impacting global economic
growth prospects. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty and may exacerbate other political, social and economic risks.
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.
Although this portfolio terminates in approximately 15 months, the strategy is long-term.
Investors should consider their ability to pursue investing in successive portfolios, if available.
There may be tax consequences unless units are purchased in an IRA or other qualified plan.