Senior Loan and Dividend Growers Portfolio, Series 23
Investors who are looking for income while still retaining growth potential have limited alternatives
when faced with the possibility of rising interest rates. The Senior Loan and Dividend Growers Portfolio
seeks to address this challenge by investing in common stocks of companies with a history of dividend
growth and the capacity to increase their dividends over time, as well as closed-end funds and
exchange-traded funds (ETFs) which invest in senior loan floating rate securities.
This unit investment trust seeks current monthly income and capital appreciation; however, there is no assurance the objectives will be met.
The Importance of Dividends
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. In fact, dividends have historically been one of the few constants in the world of
investing, contributing nearly half of the stock market’s total returns. 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. 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.
Past performance is no guarantee of future results.
What Are Senior Loans?
Senior loans are secured debt extended to non-investment grade corporations. A key characteristic of senior loans is their floating-rate feature, which resets generally every 30 to 90 days based on prevailing short-term interest rates. We believe that there is potential for interest rates to move higher making senior loans attractive because of this resetting feature. Senior loans typically generate a higher level of income as short-term interest rates rise, providing a potential offset to traditional fixed-rate bond holdings which typically come under pressure in periods of rising rates.
In addition, we believe senior loans currently offer a compelling value given that the default rate in the senior loan market is well below its long term historical average, the U.S. is experiencing slow but positive economic growth, and there continues to be strong investor demand for the asset class.
|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, closed-end funds and exchange-traded
funds that invest in senior loan floating rate securities.
Closed-end funds and ETFs are subject to various risks, including
management’s ability to meet the fund’s investment objective,
and to manage the fund’s portfolio when the underlying
securities are redeemed or sold, during periods of market
turmoil and as investors’ perceptions regarding ETFs, closed-end
funds or their underlying investments change. Unlike open-end
funds, which trade at prices based on a current determination of
the fund’s net asset value, ETFs and closed-end funds frequently
trade at a discount from their net asset value in the secondary
market. Certain of the funds in which the portfolio invests
employ the use of leverage, which increases the volatility of
All of the funds invest in floating-rate securities. A floating-rate
security is an instrument in which the interest rate payable on
the obligation fluctuates on a periodic basis based upon changes
in an interest rate benchmark. As a result, the yield on such a
security will generally decline in a falling interest rate
environment, causing the trust to experience a reduction in the
income it receives from such securities.
The yield on closed-end funds and ETFs which invest in senior
loans will generally decline in a falling interest rate environment
and increase in a rising interest rate environment. Senior loans
are generally below investment grade quality (“high-yield”
securities or “junk” bonds). Investing in such securities should be
viewed as speculative and you should review your ability to
assume the risks associated with investments which utilize such
securities. High-yield securities are subject to numerous risks
including higher interest rates, economic recession,
deterioration of the high-yield securities market, possible
downgrades and defaults of interest and/or principal. High-yield
security prices tend to fluctuate more than higher rated
securities and are affected by short-term credit developments to
a greater degree.
Common stocks are subject to risks 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 a portfolio containing 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.
All of the closed-end funds invest in investment grade securities.
Investment grade securities are subject to numerous risks
including higher interest rates, economic recession,
deterioration of the investment grade security market or
investors’ perception thereof, possible downgrades and defaults
of interest and/or principal.
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.
Certain of the funds invest in limited duration bonds. Limited
duration bonds are subject to interest rate risk, which is the risk
that the value of a security will fall if interest rates increase. While
limited duration bonds are generally subject to less interest rate
sensitivity than longer duration bonds, there can be no assurance
that interest rates will not rise during the life of the trust.
It is important to note that an investment can be made in the
underlying funds directly rather than through the trust. These
direct investments can be made without paying the trust’s sales
charge, operating expenses and organizational costs.
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 cyber security.
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
For a discussion of additional risks of investing in the trust see
the “Risk Factors” section of the prospectus.