SMid High Dividend Portfolio, Series 40
Our objective with the SMid High Dividend Portfolio is to find small and mid-size companies with above-average
dividend yields. Because smaller companies are often less reliant on the capital markets for credit,
they can be more nimble and better able to adjust in periods of economic change than larger companies.
Investing in dividend-paying stocks is a time-tested strategy for investors seeking income. History shows
that, over the long-term, dividends provide a key component of total return. As interest rates remain at
low levels, investors are turning their attention to dividend-paying stocks.
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.
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 with an initial universe of stocks that trade
on a U.S. stock exchange and eliminate those
companies that do not meet our investment
criteria. These criteria are designed to identify
small and mid-size companies with above-average
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.
|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.
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 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.
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 cybersecurity.
The recent outbreak of a respiratory disease designated as COVID-19 was first detected in China in December
2019. The global economic impact of the COVID-19 outbreak is impossible to predict but is expected to
disrupt manufacturing, supply chains and sales in affected areas and negatively impact global economic
growth prospects. The COVID-19 outbreak has also caused significant volatility and declines in global
financial markets, which have caused losses for investors. The impact of the COVID-19 outbreak may be short
term or may last for an extended period of time, and in either case could result in a substantial economic
downturn or recession.
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.