Richard Bernstein Advisors Global Dividend Kings®, Series 37
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.
In 2019, the global population aged 65 years or over was 703 million and is anticipated to
reach 1.5 billion by 2050. 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 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. 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 $12.0 billion in assets under advisement as of January 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.
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.
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.
About one year after the United Kingdom officially departed the European Union (commonly referred to as “Brexit”), the United Kingdom and the European Union reached a trade agreement that became effective on
December 31, 2020. It is not currently possible to determine the extent of the impact the Brexit trade agreement may have on the portfolio’s investments and this certainly could negatively impact current and future economic
conditions in the United Kingdom and other countries, which could negatively impact the value of the portfolio’s investments.
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.
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 resulted in major disruptions to economies and markets around the world. Financial markets have experienced extreme volatility and severe losses, negatively impacting global economic
growth prospects. The duration of the COVID-19 outbreak and its effects cannot be determined with certainty and may exacerbate other political, social and economic risks.
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.