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Income Dividend Equity Allocation (IDEA) Portfolio, Series 12

The Income Dividend Equity Allocation (IDEA) Portfolio is a unit investment trust which focuses on companies that have paid or increased their dividends over the last ten years and have market capitalizations that are greater than $1 billion.

The starting universe of securities which are eligible for inclusion in the portfolio are selected based on a proprietary rules-based model. The final portfolio of stocks are selected from this universe by a valueoriented portfolio management team from Confluence Investment Management LLC.

The companies selected for the portfolio have a tendency to be:

  • Established companies that can generate free cash flow;

  • Companies that have management teams committed to growing their dividends.

An investment approach which seeks growth in dividends is especially important since inflation can erode investment returns and lower purchasing power. In addition, because the portfolio has the potential to provide a dividend growth rate which is higher than inflation, real income to investors has the potential to grow over time.

Dividend Contributions in Both Bull and Bear Markets

pie Chart

Over the last three bull and bear market cycles, dividend yield contributed an average of 15.43% of the total return of the S&P 500 during up markets while accounting for 41.10% of the total return during bear markets.

In addition, dividends have historically been both positive and relatively stable through time. Wide swings in stock prices can be partly attributed to speculation and market sentiments; whereas dividend income has historically been less subject to speculation. Over the past 27 years ending December 30, 2016, the annualized standard deviation of price returns of the S&P 500 is 14.46% vs. 0.28% for the standard deviation of dividend return over the same investment period.1

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

1 Bloomberg

Portfolio Consultant

The securities included in the trust are selected by Confluence Investment Management LLC using a comprehensive evaluation process. This process draws upon their extensive experience of investing, on behalf of their clients, in a wide range of investments during various market cycles in their attempt to provide attractive risk-adjusted returns to their clients.

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. The portfolio terminates approximately two years from the initial date of deposit.

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. 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 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.

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.

 
The information in the prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. The prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted
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