Target Dividend Triple Play Portfolio, 4th Quarter 2023 Series
The Target Dividend Triple Play Portfolio is a unit investment trust which consists of an
approximately equal weighting between three strategies – The S&P Dividend Aristocrats
Target 25 Strategy, Target High Quality Dividend Strategy and the Value Line® Target Safety
30 Strategy. It invests in a fixed portfolio of stocks which are selected by applying pre-determined
screens and factors and holds the stocks for approximately 15 months. The
portfolio offers several potential advantages:
- Complete transparency from the stock selection process to portfolio holdings and
individual stock weightings;
- Automated buy decisions helping to eliminate unwanted emotions from the
- No style drift from manager-driven trading;
- Low cash positions so more of your money is invested;
- Diversification, discipline, and a periodic rebalancing opportunity helping to decrease
volatility and potentially increase returns.
As you can see in the charts below, if this strategy had been applied since 2000, investors
would have realized higher total returns than by investing in the S&P 500 Index. 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 Target Dividend Triple Play Portfolio.
Diversification does not guarantee a profit or protect against loss.
| Standard Deviations*
|| 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 all dividends received during a year 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.
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.
Standard Deviation is a measure of price variability (risk). A higher degree of variability indicates more volatility and therefore greater risk.
|Not FDIC Insured Not Bank Guaranteed May Lose Value
Portfolio Selection Process
The Target Dividend Triple Play Portfolio seeks above-average total return by adhering to a simple investment strategy; however, there is no assurance the objective will be met. On the initial date of
deposit, the portfolio is approximately equally weighted between the three strategies described below.
S&P Dividend Aristocrats Target 25 Strategy
- Begin with the stocks that comprise 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.
- 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.
Target High Quality Dividend Strategy
- Begin with the 1,000 stocks with the largest market capitalization as of seven business days
prior to the Initial Date of Deposit which trade on a U.S. exchange, excluding REITs, ADRs,
regulated investment companies and limited partnerships.
- Select only those stocks that meet the following criteria:
- Minimum three month average daily trading volume of $2.5 million.
- Three consecutive years of dividend increases.
- Screen for quality on the following factors:
- Net debt/assets of less than 50%.
- Three-year payout ratio of less than 50% of earnings.
- Positive free cash flow after dividends for the trailing 12 months.
- Purchase an approximately equally weighted portfolio of the 30 stocks with the highest
dividend yield, subject to a maximum of nine stocks from any one of the major GICS market
sectors. The financials and real estate sectors are combined for the sector limit purpose.
Value Line® Target Safety 30 Strategy
- Begin with all stocks or ADRs that Value Line® gives a #1 and #2 ranking for SafetyTM.
- Eliminate business development companies, regulated investment companies, limited
partnerships, real estate investment trusts and companies that do not trade on U.S. exchanges.
- Select companies with a market capitalization greater than $1 billion and a three month
average daily dollar volume greater than $5 million.
- Select companies with an indicated dividend yield above 2%.
- Eliminate companies that do not have positive free cash flow after subtracting dividends and
those that do not have return on equity above 10%.
- Rank all of the remaining companies on price volatility and price to cash flow. These rankings
are separate, but equally weighted. Companies with lower price volatility and lower, but
positive, price to cash flow receive higher rankings.
- Purchase an approximately equally weighted portfolio of the 30 eligible stocks with the best overall ranking subject to a maximum of six stocks in any one of the major Global Industry Classification
Standard (GICS®) market sectors. If, through the selection process, the stocks selected would cause the portfolio to exceed the six stocks in any one GICS® sector limitation, the lowest ranked stock
or stocks from that GICS® sector will be replaced with the next highest ranked stock or stocks in any of the other GICS® sectors. In the event of a tie, the stock with lower price to cash flow is selected.
If the sector maximum of six stocks does not result in a 30 stock portfolio, the sector restriction will be relaxed to seven stocks. If this too does not result in a 30 stock portfolio it will be relaxed to
eight stocks, then nine, and finally a maximum of ten stocks in an any one of the major GICS® market sectors. Should a 30 stock portfolio not exist at the ten stock maximum, the next highest eligible
dividend yielding names will be added until 30 eligible stocks are selected subject to a maximum of ten stocks in any one sector.
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.
Securities of non-U.S. issuers are subject to additional risks, including currency fluctuations, political risks, withholding, the lack of adequate financial information, and exchange control restrictions impacting non-U.S. 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.
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.
In February 2022, Russia invaded Ukraine which has caused and could continue to cause significant market disruptions and volatility within the markets in Russia, Europe, and the United States. The hostilities and sanctions resulting from those hostilities could have a significant impact on certain investments as well as performance.
The ongoing effects of the COVID-19 global pandemic, or the potential impacts of any future public health crisis, may cause significant volatility and uncertainty in global financial markets. While vaccines have been developed, there is no guarantee that vaccines will be effective against future 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.
The S&P 500 Dividend Aristocrats Index is a product of S&P Dow Jones Indices LLC or its affiliates ("SPDJI") and has been licensed for use by First Trust Portfolios L.P. Standard & Poor's® and S&P® are registered trademarks of
Standard & Poor's Financial Services LLC ("S&P"); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones"); and these trademarks have been licensed for use by SPDJI and sublicensed for
certain purposes by First Trust Portfolios L.P. The Target Dividend Triple Play Portfolio, which contains the S&P Dividend Aristocrats Target 25 Strategy, is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P,
their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product nor do they have any liability for any errors, omissions, or interruptions of the S&P 500
Dividend Aristocrats Index.
“Value Line”, “The Value Line Investment Survey”, “Timeliness,” and “Safety” are trademarks or registered trademarks of Value Line, Inc. (“Value Line”) and have been licensed for use for certain purposes by First Trust Portfolios
L.P. The Target Dividend Triple Play Portfolio, which contains The Value Line® Target Safety 30 Strategy, is not sponsored, endorsed, recommended, sold or promoted by Value Line and Value Line makes no representation
regarding the advisability of investing in products utilizing such strategy. First Trust Portfolios L.P. is not affiliated with any Value Line company.