Deep Value Dividend Opportunity Portfolio, Series 5
The Deep Value Dividend Opportunity Portfolio invests in 25 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 41% of the 10.16% average
annual total return on the S&P 500 Index from 1926 through 2017. Of course, past performance is no
guarantee of future results.
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
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 marketcapitalization,
the ratio of each stock's current price to its estimated current year earnings and also its
dividend payout ratio. 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 25 highest dividend-yielding stocks
for the portfolio subject to a maximum of approximately 30% in a single sector. The stocks are
approximately equally weighted within the portfolio.
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 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.
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.
You should be aware that the portfolio is
concentrated in stocks in both the
consumer products and financials 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 financials
sector are subject to the adverse effects
of volatile interest rates, economic
recession, decreases in the availability of
capital, increased competition from new
entrants in the field, and potential
Certain of the securities held by the trust are issued by foreign entities. An investment in foreign
securities should be made with an understanding of the additional risks involved with foreign
issuers, such as currency and interest rate fluctuations, nationalization or other adverse political
or economic developments, lack of liquidity of certain foreign markets, withholding, the lack of
adequate financial information, and exchange control restrictions impacting foreign 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.
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 cyber security.
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.