International High Dividend Equity Portfolio, Series 42
The International High Dividend Equity Portfolio provides a convenient way to add both an international
dimension to your investment portfolio as well as to invest in companies that we believe have shown a
solid history of distributing dividends to shareholders. We believe that this could significantly expand
your investment opportunities and potentially enhance your overall return.
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
begin by selecting stocks of foreign companies
that trade on a U.S. stock exchange either directly
or through an American Depositary Receipt 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 dividend levels.
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 objectives, 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 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.
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.
Certain securities held by the portfolio are issued by companies in the Asia Pacific region, making the
portfolio more susceptible to the economic, market, regulatory, political, natural disasters and local risks
of the Asia Pacific region. The region has historically been highly dependent on global trade which creates a
risk with this dependency on global growth. The stock markets tend to have a larger prevalence of smaller
companies that are inherently more volatile and less liquid than larger companies.
Certain securities held by the portfolio are issued by companies headquartered in both Europe and the United Kingdom, the portfolio may present more risks than a portfolio which is broadly diversified over several regions.
The United Kingdom vote to leave the European Union and other recent rapid political and social change throughout Europe make the extent and nature of future economic development in Europe and the effect on securities
issued by European issuers difficult to predict.
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. Risks associated with investing in foreign securities
may be more pronounced in emerging markets where the securities markets are substantially smaller, less
liquid, less regulated and more volatile than the U.S. and developed foreign markets.
About one year after the United Kingdom officially departed the European Union (commonly referred to as
“Brexit”), the United Kingdom and the European Union reached a trade agreement that became effective
on December 31, 2020. It is not currently possible to determine the extent of the impact the Brexit trade
agreement may have on the portfolio’s investments and this certainly could negatively impact current and
future economic conditions in the United Kingdom and other countries, which could negatively impact the
value of the portfolio’s investments.
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.
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.