ETF Education Report: John Hancock Preferred Income Fund II (HPF)

What this ETF is trying to do

The John Hancock Preferred Income Fund II (ticker: HPF) is an exchange-traded fund (ETF) listed on the NYSE. While the specific investment strategy is not detailed in the provided data, the fund's name and distribution patterns suggest it focuses on providing income to investors.

What the numbers show

When looking at an ETF, it is important to understand the difference between "price return" and "total return."

• Price Return: This measures only the change in the share price. For HPF, the year-to-date (YTD) price return is approximately -14.50%. The one-year price return is approximately -18.60%, and the three-year price return is approximately -6.47%.

• Total Return: This includes both the share price changes and the money paid out through distributions. The YTD total return is approximately -8.29%, and the one-year total return is approximately -10.70%. Interestingly, the three-year total return is positive at approximately 23.04%.

To visualize the price change, the estimated price from roughly one year ago was $16.88. The current price is $13.74.

Income and distribution explanation

This ETF has a distribution yield of approximately 10.79%. This means the fund paid out $1.48 in trailing distributions relative to its price. These payments usually happen monthly, with Thursday being the most common day for a distribution.

It is important to remember that a high distribution yield does not mean an investor earned that same percentage as a total return. Total return is the more complete picture of how the investment performed.

NAV erosion explanation

"NAV erosion" refers to a decline in the Net Asset Value (the actual value of the assets held by the fund). While a falling share price is not the same thing as NAV erosion, we use "erosion scores" to measure risk.

HPF has an erosion score of 55, which is labeled as "moderate price erosion." This indicates a moderate level of risk regarding how the price has moved over time. However, there is no "severe erosion-risk flag" for this fund.

Pros

• The fund has a high distribution yield of approximately 10.79%.

• The three-year total return is positive at approximately 23.04%, showing that distributions have helped the overall performance over that period.

Cons

• The share price has seen declines in the year-to-date and one-year periods.

• The fund shows a moderate erosion-risk score.

Beginner takeaway

When looking at funds like HPF, high yields can be eye-catching, but they should not be viewed in isolation. Always look at the total return to see how much the share price dropped compared to how much cash was paid out. Understanding the difference between a simple price change and the total return is key to understanding an ETF's actual performance.