Richard Bernstein Advisors Global Dividend Kings®, Series 33
The Dividend Attraction
Investors today are challenged to find attractive sources of income for their portfolios. This
reality, coupled with the closing of the gap between dividend and U.S. government bond
yields, (see Chart 1) has prompted many investors to consider the potential benefits of taking a
yield approach to equity investing. For investors who were intimidated by events during the
global financial crisis, the simplicity and transparency of an approach that has the potential to
provide both income and capital appreciation may be attractive.
A Key Component of Total Return
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 1926 through 2018.
In 2019, the global population aged 65 years or over was 703 million and is anticipated to
reach 1.5 billion by 2050. In addition, the number of persons aged 80 years or over is estimated
to increase more than threefold between 2017 and 2050 increasing from 137 million to 425
million. globally, one in 11 people are over age 65 and that number is projected to
be one in six people by 2050. in 2018, for the first time in history, persons aged 65 or above
outnumbered children under five years of age worldwide. in addition, the number of persons
aged 80 years or older is anticipated to triple, from 143 million in 2019 to 426 million in 2050.
With more investors spending more years in retirement, we believe demand for dividend income
A Global Approach to Dividends
Diversification is one of the principal advantages of global investing. Because global markets
often follow different cycles than the U.S. markets, investing globally may provide gains when
domestic markets are flat or declining. Consider that in 12 of the 30 calendar years from 1989
to 2018, the MSCI World ex USA Index outperformed the S&P 500 Index. It is important to note
that diversification does not guarantee a profit or protect against loss.
By investing a portion of your portfolio outside the U.s., you may significantly expand your
investment choices and participate in the long-term growth potential of foreign companies. The
international Monetary Fund, in its July 2019 release, forecasts a global growth rate of 3.0% for
2019 and 3.4% for 2020. its estimate for the U.s. is 2.4% for 2019 and 2.1% for 2020. in addition,
dividend yields have typically been higher overseas, as shown in Chart 2. it is important to note
that there can be no assurance that companies will declare dividends in the future or that, if
declared, they will remain at current levels or increase over time.
1United Nations - Department of Economic and Social Affairs
Reasons to Consider Dividend-Paying Stocks
- Interest rates remain low
- Key component of total return
- Global demographics and diversification
The Richard Bernstein Advisors Global Dividend Kings® Portfolio is a unit investment trust (UIT)
which seeks total return through a combination of dividend income and capital appreciation;
however, there is no assurance the objective will be met. A UIT is an investment vehicle which
consists of a professionally selected unmanaged portfolio of securities which are held for a
predetermined period of time. The value of the units of the trust will fluctuate each day with
the value of the underlying securities; therefore it is possible to lose money by investing in the
trust. The stocks are selected for the trust by Richard Bernstein Advisors (RBA) using a
comprehensive process and held for approximately two years.
RBA Portfolio Selection Process
RBA’s quantitative techniques seek income in a risk-controlled process. RBA starts with the
companies listed on the MSCI ACWI Index. This index captures large and mid-cap representation
across 23 developed and 26 emerging market countries.
A Disciplined Approach To Yield
RBA starts with the companies listed on the MSCI ACWI Index. This index captures
large and mid-cap representation across 23 developed and 26 emerging market
countries. The index covers approximately 85% of the global investable equity market.
From this universe, RBA then screens for companies that have increased their trailing
12-month dividend each year for the previous 5 years. Special dividends are not
included. The highest yielding stocks are removed, as they tend to be most susceptible
to dividend cuts. This screening process generally results in 200 to 500 stocks.
RBA then uses a proprietary optimization method to weight the stocks. This final step
attempts to reduce the volatility of the overall portfolio, while maximizing the yield.
Thus, the strategy attempts to reduce risk in two ways: First, RBA screens for
consistent dividend growth. second, RBA uses a proprietary weighting method which
strives to reduce overall portfolio volatility. From the initial universe of over two
thousand, the resulting optimally weighted portfolio consists of less than 100 names.
The trust will invest in U.S. listed securities of domestic and foreign companies,
American Depository Receipts (ADRS) or Global Depository Receipts (GDRS) of foreign
companies, and foreign listed securities.
|Richard Bernstein Advisors, LLC|
|RBA is a registered investment adviser focusing on longer term investment strategies that combine top-down, macroeconomic analysis and quantitatively-driven portfolio construction, utilizing Mr. Bernstein's widely recognized expertise in style investing and asset allocation.|
|The firm’s Chief Executive and Chief Investment Officer, Mr. Bernstein has over 38 years’ experience on Wall Street, including most recently
as the Chief Investment Strategist at Merrill Lynch & Co. RBA acts as sub-advisor for mutual funds and also selects portfolios for
income-oriented Unit Investment Trusts sponsored by First Trust Portfolios l.P. additionally, RBA runs exchange-traded fund asset
allocation portfolios and separately managed accounts and is the index provider for two exchange-traded funds. RBA has
approximately $9.0 billion in assets under advisement as of July 30, 2019.
| Not FDIC Insured Not Bank Guaranteed May Lose Value
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.
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.
One of the securities in the portfolio is issued by a Real Estate Investment Trust (REIT). Companies
involved in the real estate industry are subject to changes in the real estate market, vacancy rates
and competition, volatile interest rates and economic recession.
Because the portfolio is concentrated in companies
headquartered in Europe, the portfolio may present more risks
than a portfolio which is broadly diversified over several regions.
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 developed, less liquid, less regulated, and more
volatile than the U.S. and developed foreign markets.
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 cybersecurity.
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.