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Richard Bernstein Advisors Global Dividend Kings®, Series 40

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. The simplicity and transparency of this approach has the potential to provide both income and capital appreciation.

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 40% of the 10.3% average annual total return on the S&P 500 Index, from 1926 through 2020.

Global Demographics1

In 2020, the global population aged 65 years or over was 727 million and is anticipated to reach over 1.5 billion in 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 will increase.

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 1991 to 2020, 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. 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.


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 27 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 as they are typically one-time payments. 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 39 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 manages exchange-traded fund (ETF) based asset allocation separately managed account (SMA) portfolios and is the index provider for one ETF. RBA has approximately $15.4 billion in assets under advisement as of October 31, 2021.
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 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.

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.

Certain of the securities in the portfolio are issued by Real Estate Investment Trusts (REITs). 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.

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 mid-cap companies is subject to additional risks, as the share prices of 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 caused significant volatility and declines in global financial markets, causing losses for investors. The development of vaccines has slowed the spread of the virus and allowed for the resumption of “reasonably” normal business activity in the United States, although many countries continue to impose lockdown measures. Additionally, there is no guarantee that vaccines will be effective against emerging variants of the disease.

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.

Fund Cusip Information
30323E106 (Cash)
30323E114 (Reinvest)
30323E122 (Cash-Fee)
30323E130 (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 professionals 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. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
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