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Target High Quality Dividend, 4th Quarter 2019 Series

Reasons To Consider Dividend-Paying Stocks

  • History shows that, over the long-term, dividends provide a key component of total return. As interest rates remain low, investors are turning their attention to dividend paying stocks.
  • Historically, dividends have made up a significant portion of stock market total return. According to Ibbotson Associates, dividends have provided approximately 42% of the 9.99% average annual total return on the S&P 500 Index from January 1926 through December 2018.
  • 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.
  • We believe that companies that distribute dividends on a regular basis generally demonstrate financial strength and positive performance relative to their peers.

The Strategy
The Target High Quality Dividend Portfolio is a unit investment trust which invests in a fixed portfolio of stocks for approximately 15 months. The stocks are selected by applying a disciplined investment strategy which adheres to pre-determined screens and factors. The portfolio seeks above-average total return; however, there is no assurance the objective will be met.

The strategy is based on these steps:

  • Begin with the 1,000 stocks with the largest market capitalization as of two business days prior to the Initial Date of Deposit which trade on a U.S. exchange, excluding REITs, ADRs, regulated investment companies and limited partnerships.

  • Select only those stocks that meet the following criteria:
    • Minimum three month average daily trading volume of $2.5 million.
    • Three consecutive years of dividend increases.

  • Screen for quality on the following factors:
    • Net debt/assets of less than 50%.
    • Three-year payout ratio of less than 50% of earnings.
    • Positive free cash flow after dividends for the trailing 12 months.

  • Purchase an approximately equally weighted portfolio of the 30 stocks with the highest dividend yield, subject to a maximum of nine stocks from any one of the major GICS market sectors. The financials and real estate sectors are combined for the sector limit purpose.

It is important to note that the past performance of the strategy is hypothetical and it is not indicative of the future performance of the Target High Quality Dividend Portfolio.

Strategy Chart

Stratistics Chart

Not FDIC Insured • Not Bank Guaranteed • May Lose Value

Mountain Chart

Standard Deviations* Average Annual Total Returns*
S&P 500
Strategy S&P 500
Since 1995 14.58% 15.66% 9.40% 10.92%
20 years 14.46% 15.94% 5.61% 8.30%
15 years 13.46% 15.41% 7.76% 8.37%
10 years 13.59% 16.46% 13.10% 14.20%
5 years 10.94% 13.54% 8.48% 5.28%
3 years 10.95% 14.23% 9.24% 8.88%
*Through 12/31/18

Annual Total Returns
Year S&P 500

1995 37.50% 39.64%
1996 22.89% 24.24%
1997 33.31% 34.11%
1998 28.55% 5.04%
1999 21.03% -8.06%
2000 -9.10% 17.75%
2001 -11.88% 22.27%
2002 -22.09% -8.59%
2003 28.65% 21.90%
2004 10.87% 15.43%
2005 4.90% 1.96%
2006 15.76% 17.24%
2007 5.56% -4.16%
2008 -36.99% -33.06%
2009 26.46% 43.35%
2010 15.08% 14.08%
2011 2.08% 9.31%
2012 15.98% 11.31%
2013 32.36% 46.63%
2014 13.66% 10.65%
2015 1.38% -9.44%
2016 11.93% 13.66%
2017 21.80% 25.28%
2018 -4.39% -9.35%
09/30/19 20.54% 16.70%

Past performance is no guarantee of future results and the actual current performance of the portfolio may be lower or higher than the hypothetical performance of the strategy. Hypothetical returns for the strategy in certain years were significantly higher than the returns of the S&P 500 Index. Hypothetical strategy returns were the result of certain market factors and events which may not be replicated in the future. You can obtain performance information which is current through the most recent month-end by calling First Trust Portfolios L.P. at 1-800-621-1675 option 2. Investment return and principal value of the portfolio will fluctuate causing units of the portfolio, when redeemed, to be worth more or less than their original cost.

Simulated strategy returns are hypothetical, meaning that they do not represent actual trading, and, thus, may not reflect material economic and market factors, such as liquidity constraints, that may have had an impact on actual decision making. The hypothetical performance is the retroactive application of the strategy designed with the full benefit of hindsight. Strategy returns reflect a sales charge of 1.85% and estimated annual operating expenses of 0.185%, plus organization costs, but not taxes or commissions paid by the portfolio to purchase securities. Returns assume that all dividends received during a year are reinvested monthly. Actual portfolio performance will vary from that of investing in the strategy stocks because it may not be invested equally in these stocks and may not be fully invested at all times. It is important to note that the strategy may underperform the S&P 500 Index in certain years and may produce negative 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.

Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.

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.

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.

You should be aware that the portfolio is concentrated in stocks in the financials sector which involves additional risks, including limited diversification. 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 increased regulation.

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.

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.

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.

Although this unit investment trust terminates in approximately 15 months, the strategy is longterm. 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.

Fund Cusip Information
30311J307 (Cash)
30311J315 (Reinvest)
30311J323 (Cash-Fee)
30311J331 (Reinvest-Fee)
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The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial advisors are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
First Trust Portfolios L.P.  Member SIPC and FINRA.
First Trust Advisors L.P.
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