S&P Dividend Aristocrats Target 25 Portfolio, 1st Quarter 2018 Series
Reasons To Consider Dividend-Paying Stocks
- History shows that, over the long-term, dividends provide a key component of total return. As interest rates
remain low, investors are turning their attention to dividend paying stocks.
- Historically, dividends have made up a significant portion of stock market total return. According to Ibbotson
Associates, dividends have provided approximately 41% of the 10.16% average annual total return on the S&P
500 Index from January 1926 through December 2017.
- 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.
- We believe that companies that distribute dividends on a regular basis generally demonstrate financial
strength and positive performance relative to their peers.
Why Invest In Companies With A History Of Growing Dividends?
Quality | Companies that have been able to consistently grow their dividend have a tendency to be high
quality compared to those of the broader market in terms of earnings quality and leverage, in our opinion. A
company's ability to reliably increase its dividend for years, or even decades, can be an indication of its financial
strength or discipline.
Buffer Against Market Volatility | Dividend growth companies may be attractive to investors looking
for disciplined companies that can endure difficult market and economic environments. These companies typically
feature healthy balance sheets and consistent cash flows that provide plenty of capital to effectively operate their
business and fund a growing dividend.
Address The Potential Risks Associated With Rising Rates | Unlike high dividend yield
strategies which tend to be concentrated in companies from certain sectors that could come under pressure during
periods of rising rates, dividend growth strategies tend to be more diversified and able to provide increased exposure
to sectors that could become more desirable with improving economic activity and rising rates.
What Is The S&P 500 Dividend Aristocrats Index?
The S&P 500 Dividend Aristocrats Index is comprised of companies that have increased dividends every year for
the last 25 consecutive years. The index captures companies with a history of providing sustainable dividend
income and capital appreciation potential, both key factors in total return.
The S&P Dividend Aristocrats Target 25 Portfolio invests in companies from the S&P 500
Dividend Aristocrats Index. The index consists of companies from the S&P 500 Index that have
increased dividends every year for at least 25 consecutive years.
The strategy is based on these steps:
- Begin with the stocks that comprise the S&P 500 Dividend Aristocrats Index.
- Rank each stock on three equally weighted factors:
- Debt-to-equity. Compares a company's long-term debt to their stockholder's equity. Higher
levels of this ratio are associated with higher risk, lower levels with lower risk.
- Price-to-cash flow. Measures the cost of a company's stock for every dollar of cash flow
generated. A lower ,but positive, ratio indicates investors are paying less for the cash flow generated
which can be a sign of value.
- Return-on-assets. Compares a company's net income to its total assets. The ratio shows how
efficiently a company generates net income from its assets.
- Purchase an approximately equally weighted portfolio of the 25 stocks with the best overall
ranking on the three factors with a maximum of seven stocks from any one of the major Global
Industry Classification Standard (GICS) market sectors. Regulated investment companies,
limited partnerships and business development companies are not eligible for selection.
It is important to note that the past performance of the strategy is hypothetical and it is not
indicative of the future performance of the S&P Dividend Aristocrats Target 25 Portfolio.
Not FDIC Insured Not Bank Guaranteed May Lose Value
||Average Annual Total Returns*
|Annual Total Returns
Past performance is no guarantee of future results and the actual current performance of the portfolio may be lower or higher than the hypothetical performance of the
strategy. Hypothetical returns for the strategy in certain years were significantly higher than the returns of the S&P 500 Index. Hypothetical strategy returns were the result
of certain market factors and events which may not be replicated in the future. You can obtain performance information which is current through the most recent month-end
by calling First Trust Portfolios L.P. at 1-800-621-1675 option 2. Investment return and principal value of the portfolio will fluctuate causing units of the portfolio, when
redeemed, to be worth more or less than their original cost.
Simulated strategy returns are hypothetical, meaning that they
do not represent actual trading, and, thus, may not reflect
material economic and market factors, such as liquidity
constraints, that may have had an impact on actual decision
making. The hypothetical performance is the retroactive
application of the strategy designed with the full benefit of
hindsight. Strategy returns reflect a sales
charge of 1.85% and estimated annual operating expenses of 0.185%, plus organization costs, but not
taxes or commissions paid by the portfolio to purchase
securities. Returns assume that dividends are reinvested
monthly. Actual portfolio performance will vary from that of
investing in the strategy stocks because it may not be invested
equally in these stocks and may not be fully invested at all
times. It is important to note that the strategy may
underperform the S&P 500 Index in certain years and may
produce negative results.
Standard Deviation is a measure of price variability (risk). A
higher degree of variability indicates more volatility and
therefore greater risk.
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
You should be aware that the portfolio is concentrated in stocks
in the consumer products sector which involves additional
risks, including limited diversification. The companies engaged
in the consumer products industry are subject to global
competition, changing government regulations and trade
policies, currency fluctuations, and the financial and political
risks inherent in producing products for 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
Although this unit investment trust terminates in
approximately 15 months, the strategy is long-term. Investors
should consider their ability to pursue investing in successive
portfolios, if available. There may be tax consequences unless
units are purchased in an IRA or other qualified plan.
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.
"Standard & Poor’s", "S&P", "S&P 500" and "S&P Dividend Aristocrats"
are trademarks of Standard & Poor’s Financial Services LLC ("S&P") and
have been licensed for use by First Trust Portfolios L.P. The S&P
Dividend Aristocrats Target 25 Portfolio is not sponsored,
endorsed, sold, or promoted by Standard & Poor’s and Standard &
Poor’s makes no representation regarding the advisability of
investing in such products.