High Dividend Equity Portfolio, Series 40
Dividends have traditionally been one of the few constants in the world of investing, helping to buffer volatility in both good and bad markets and contributing nearly half of the stock market’s total
returns historically. According to Ibbotson Associates, dividends have provided approximately 42% of the 9.99% average annual total return on the S&P 500 Index, from 1926 through 2018.1
A dividend is a payment from a company’s earnings. Since 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.
1 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
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 and
eliminate those companies that do not meet our investment criteria. These criteria are designed to
identify well-capitalized companies with above-average dividend yields and the ability to sustain current
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
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 objective, 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 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.
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.
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.
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.