PDT: A Hybrid Fund That Is Easily Covering Its High Yield

2025-01-17 07:12:34 ET

Summary

• The John Hancock Premium Dividend Fund offers a 7.78% yield, higher than domestic broad-market equity indices and preferred stocks, making it attractive for income-focused investors.
• The fund's yield is lower than some of its peers, but it also includes equities in its portfolio.
• The fund's strategy of investing in both common equities and preferred stocks provides potential for capital gains, which is nice should inflation continue to accelerate.
• The fund's portfolio is very different from the S&P 500 Index, which could be good for anyone trying to diversify away from the "Magnificent 7."
• The fund's current 2.83% discount on net asset value is reasonable but not the cheapest option compared to its peers; waiting might offer a better entry point.

The John Hancock Premium Dividend Fund ( PDT ) is a closed-end fund that provides a way for investors to earn a high level of income from the assets that they already possess. As is the case with most closed-end funds, it does a much better job at serving income investors than most index funds. This is evidenced by its fairly attractive 7.78% current yield, which is significantly higher than any domestic broad-market equity index:

The John Hancock Premium Dividend Fund also has a higher yield than domestic preferred stocks, which are fixed-income securities that are included in the fund’s portfolio. As of the time of writing, the ICE Exchange-Listed Preferred & Hybrid Securities Index ( PFF ) yields 6.26% on a trailing twelve-month basis. As many investors who are seeking to earn income from their assets have the desire and need to earn as much income as they can from their investments, the John Hancock Premium Dividend Fund seems like it would be more desirable than nearly any index fund to most of those investors in its target market....

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