IYR - HTD: Latest Report Shows Continuing Pressure On Distribution But Still A Good Fund

2024-02-15 03:24:24 ET

Summary

• The John Hancock Tax-Advantaged Dividend Income Fund offers a high level of current income with an 8.70% yield, higher than the S&P 500 Index and Alerian MLP Index.
• The fund focuses on common equities, particularly utility stocks, which provide stable cash flows and higher dividend yields.
• The fund's leverage ratio has improved but is still higher than ideal, and it has failed to fully cover its distribution over the past two years.
• The fund may not be able to cover its distribution if the market corrects this year, which is a real possibility if the Federal Reserve fails to cut interest rates to the market's expectations.
• The current valuation is decent, and this fund will probably prove to be a solid core holding for long-term income-focused investors.

The John Hancock Tax-Advantaged Dividend Income Fund ( HTD ) is a closed-end fund that income-focused investors can purchase to achieve their goals of earning a high level of current income from the assets in their portfolio. The fund's 8.70% current yield is evidence of its ability to provide income, as this is substantially higher than the 1.32% current yield of the S&P 500 Index ( SP500 ). It is even higher than the 8.03% yield of the Alerian MLP Index ( AMLP ), which has perhaps the highest yield of any common equity index. As such, at least on the surface, the fund appears to be a very solid way to earn a high level of current income. The John Hancock Tax-Advantaged Dividend Income Fund focuses heavily on common equities rather than fixed-income securities like many other income-focused closed-end funds, so it could also be appealing to those investors who do not wish to give up their exposure to this security class.

As regular readers can likely recall, we last discussed the John Hancock Tax-Advantaged Dividend Income Fund in early November 2023. The market has generally been very strong since that time due to widespread expectations that interest rates will rapidly be reduced over the course of this year. While these expectations may prove misguided (see here ), market expectations have still caused just about every asset class apart from cash to deliver very strong performance since the date that the previous article was published. As such, we can expect that the performance of this fund has been pretty strong since the previous article. That has certainly been the case, as the fund's share price is up 8.49% since that date. This is, admittedly, nowhere near as good as the 14.70% gain of the S&P 500 Index, but it is better than the 3.65% gain of the Bloomberg U.S. Aggregate Bond Index ( AGG ):

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