John Hancock Preferred Income Fund (HPI)

The John Hancock Preferred Income Fund (HPI) is an ETF designed to provide investors with income. Its most notable characteristics are a high distribution yield and a recent decline in share price.

What this ETF is trying to do

HPI focuses on generating income for its shareholders. It does this by investing in preferred securities, which are a type of investment that typically pays a fixed amount of income.

What the numbers show

The current price of HPI is $13.90. When looking at performance, it is important to distinguish between price return (the change in share price) and total return (which includes the distributions paid to investors).

• Year-to-Date (YTD): The price return is -14.14%, while the total return is -8.67%.

• One-Year: The price return is -19.56%, while the total return is -11.88%.

• Three-Year: The price return is 0%, but the total return is 30.17%.

• Five-Year: The total return is 1.01%.

An estimated price from roughly one year ago was $17.28. For example, if an investor had put $10,000 into the fund one year ago based on that estimated price, the value of those shares alone (without counting distributions) would have declined by approximately 19.56%.

Income and distribution explanation

HPI pays distributions usually every month. Over the last 12 months, it has made 12 payments totaling $1.48 per share. This results in a distribution yield of approximately 10.66%.

It is important for beginners to remember that a high distribution yield alone can be misleading. A high yield does not guarantee that the investment is growing or that the original money invested is safe. In this case, the total returns for the year and YTD are lower than the distribution yield, meaning the share-price decline has offset some of the income earned.

NAV erosion explanation

The supplied data is sufficient to evaluate price erosion, but it does not include enough historical NAV-per-share data to confirm or rule out NAV erosion.

Based on price-based evidence, HPI has an erosion score of 55, which is labeled as "Moderate price erosion." This means the fund's market price has shown a trend of decline.

Pros

• High Monthly Income: The fund provides regular cash payments with a distribution yield over 10%.

• Long-term Total Return: The three-year total return is positive at 30.17%.

Cons

• Price Decline: The share price has fallen significantly over the last year and so far this year.

• Income Grade: The fund has an income rating grade of "F" and a score of 48.

Beginner takeaway

HPI is a fund that pays out a high amount of monthly cash, but the value of the shares themselves has dropped recently. While the total return over three years is positive, the one-year total return is negative. Investors often care about principal stability, which means they want the original amount they invested to stay steady even while they collect income. In HPI's case, the share price has declined recently.