John Hancock Preferred Income Fund (HPI)
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HPI Chart
HPI: Stretched CEF Blending Corporate Bonds With Preferred Equity
HPI is a leveraged CEF blending preferred equity and BBB/BB corporate bonds, with high financials exposure and 38% leverage, magnifying both gains and losses. Despite a 9% distribution, a significant portion is return of capital, making the true yield closer to 7-8%, not fully supported by income. Valuation is unattractive: HPI trades at NAV with tight credit spreads and high rates, leaving little upside and heightened downside risk in a downturn.
HPI: This Preferred Stock Fund Has A Strange Portfolio
The John Hancock Preferred Income Fund offers an 8.04% yield, but its portfolio is split between preferred stocks and corporate bonds, diverging from its stated strategy. The fund's share price has risen 24.18% over the past year, reducing its yield from 9.84% to 8.04%. The fund's net asset value has not kept up with the recent share price appreciation.
HPI: This Fund Is Navigating The Current Environment Well, But It Is Pricy
The John Hancock Preferred Income Fund offers an attractive 8.88% yield, one of the highest among preferred stock funds. The fund's current yield may not keep up with rising living costs if held in a taxable account. The fund has outperformed its benchmark indices and has a relatively stable distribution history, but its portfolio allocation and valuation should be considered.
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John Hancock Preferred Income Fund Profile
| NYSE Exchange | US Country |
Overview
The John Hancock Preferred Income Fund is a specialized closed-end equity fund, expertly managed by John Hancock Investment Management. It positions itself as a prime investment vehicle for individuals and entities aiming to achieve high levels of current income, while also maintaining an emphasis on capital preservation. This fund particularly stands out due to its targeted investment in preferred stocks and various other income-generating securities, reflecting a strategic emphasis on drawing income from assets. By focusing on preferred shares from sectors such as utilities, financial services, and energy, the fund aims to provide investors with a consistent income stream, mitigating risk through diversified exposure and strategic value and credit analysis.
Products and Services
- Investment in Preferred Stocks
The core of the John Hancock Preferred Income Fund’s strategy lies in its investment in preferred stocks, primarily within the utility, financial, and energy sectors. Preferred stocks offer the potential for stable dividends, making them an attractive option for income-focused investors. The fund carefully selects these stocks based on a comprehensive value and credit analysis, aiming to ensure a high level of income consistent with capital preservation.
- Income-Generating Securities
Beyond preferred stocks, the fund diversifies its portfolio by incorporating a range of other income-generating securities. This approach allows for a broader exposure to income-producing assets, enhancing the overall return potential for investors while spreading risk across various sectors and asset types. The inclusion of these securities further underlines the fund’s goal of achieving a balanced mix of income and safety for its investors.
- Leverage Strategy
Utilizing leverage is another key strategy employed by the John Hancock Preferred Income Fund. By borrowing capital at lower rates and investing in higher-yielding assets, the fund seeks to enhance the income potential for its shareholders. This method, while introducing an additional level of risk, is carefully managed to align with the fund’s overarching principle of capital preservation amidst its pursuit of high income.
- Sector Exposure
The fund specifically targets sectors traditionally seen as less volatile during economic downturns, such as utilities. This strategic sector exposure is designed to provide a stable income flow, even in less favorable market conditions. By focusing on utilities, financial, and energy sectors, the fund positions itself in areas where the risk-reward balance is optimized for income and safety.
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