John Hancock Preferred Income Fund Adjusts Dividend Rate

Strategic Insights -

John Hancock Preferred Income Fund, a closed-end diversified fund focused on providing high current income and preserving capital, has revised its monthly dividend rate in a move aimed at improving its long-term sustainability. The new dividend rate equates to an impressive 7.24% annualized yield, based on the fund's closing market price as of February 9, 2005. This adjustment reflects the fund's approach of only paying income earned, taking into account the refinancing or calling of certain higher-yielding preferred securities in its portfolio. The increased borrowing costs due to rising short-term interest rates since the fund's launch in August 2002 have also put pressure on the dividend, prompting management to reassess and adjust the dividend rate accordingly.

Key Takeaways:

  • The John Hancock Preferred Income Fund has adjusted its monthly dividend rate to ensure long-term sustainability.
  • The new dividend rate corresponds to an annualized yield of 7.24%, based on the fund's closing market price as of February 9, 2005.
  • The adjustment is a result of the fund's approach to only paying income earned, considering the refinancing or calling of certain higher-yielding preferred securities in its portfolio.
  • The fund has been unable to invest at the same yields due to increased borrowing costs from rising short-term interest rates since its launch in August 2002.
  • The Fund invests at least 80% of its total assets in preferred securities and other fixed income securities rated investment grade.
  • John Hancock Funds, the fund's manager, had approximately $29 billion in assets under management as of September 30, 2004.
  • Manulife Financial Corporation, the parent company of John Hancock Financial Services, had Cdn$346 billion (US$274 billion) in funds under management as of September 30, 2004.

Statistics:

  • 7.24%: Annualized yield of the new dividend rate.
  • 100%: Minimum investment in preferred securities and other fixed income securities rated investment grade.
  • $29 billion: Assets under management by John Hancock Funds as of September 30, 2004.
  • 2004: Year in which John Hancock Funds reported $29 billion in assets under management and Manulife Financial Corporation reported Cdn$346 billion (US$274 billion) in funds under management.

Sources:

  • John Hancock Preferred Income Fund press release (date not specified in source material).
  • John Hancock Funds press release, September 30, 2004.
  • Manulife Financial Corporation's website, http://www.manulife.com.
  • http://www.jhfunds.com/.