Generous Discount Offered, Retaining ~8.3% Distribution Return After Adjustment
John Hancock Tax-Advantaged Dividend Income Fund (HTD): A Monthly Dividend Powerhouse with Risks
Step into the world of income-focused investments with the John Hancock Tax-Advantaged Dividend Income Fund (HTD), a closed-end fund offering a hefty monthly payout and a tilt towards utilities and financials. But with great returns comes great risks, as this fund uses leverage to juice its yields.
HTD by the Numbers
- Monthly distribution rate: 7.67% (as of July 2025)
- 1-Year Z-score: 0.30
- Discount/Premium: -7.61%
- Expense Ratio: 1.19%
- Leverage: High (exact ratio unspecified)
- Managed Assets: $1.31 billion
- Structure: Perpetual
A High-Risk, High-Reward Play
HTD seeks to provide a high level of after-tax total return from dividend income and capital appreciation. To achieve this goal, it typically invests 80% of its assets in high-dividend-paying securities, with a strong leaning towards the utility and preferred/fixed-income sectors within financials.
Its leveraged structure can enhance potential returns – but also amplifies downside risks during market slumps. The added juice seems to have been worth it so far, with the fund outperforming its primary and secondary blended benchmarks over the last couple of years.
Discount Remains Attractive
Despite a volatile market period, the discount on HTD hasn't changed significantly from our previous analysis, making it a potential buy candidate for income-seeking investors. The fund is currently trading below its longer-term average but has recovered from its deepest discount levels seen in 2023/2024.
Steady, Growing Monthly Distributions
HTD's most recent distribution hike to $0.158 per month boosted the fund's distribution rate to 8.31% based on market price. Since the Global Financial Crisis, the fund has maintained a strong record of steady or growing distributions, with only one cut in its history dating back to 2004.
However, with the increase, the net investment income coverage has dipped to around 58%, meaning the fund will need capital gains to support its distributions.
Portfolio Breakdown
HTD's portfolio is dominated by the utility and financials sectors, with a current allocation of 45% and 34.5%, respectively. Key holdings include Verizon Communications (VZ) and AT&T (T). The fund's equity-based utility sector and fixed-income financials exposure make it particularly sensitive to interest rates, both long-term and short-term.
Caveats & Considerations
HTD offers a tantalizing monthly dividend yield, but its leveraged structure and heavy reliance on utilities and financials introduce risks. The fund is sensitive to changes in interest rates, as its leverage amplifies both potential returns and downside risk. Additionally, the managed distribution plan guarantees a fixed payout, which can lead to return of capital distributions if the portfolio income isn't sufficient, potentially eroding net asset value over time.
The discount to NAV suggests that the market may have concerns about these risks impacting HTD's future performance. Income-focused investors should weigh these risks against the steady income appeal for their long-term investment expectations.
If you're after consistent monthly income and can stomach the risks, HTD might be worth a look. But remember – smarter investments often come with a dose of caution!
[1] S&P Global Market Intelligence, Mailing List, July 12, 2025[2] The Wall Street Journal, "John Hancock Tax-Advantaged Dividend Income Fund Raising Monthly Dividend," July 6, 2025[3] Morningstar, "John Hancock Tax-Advantaged Dividend Income Fund," July 12, 2025
1. Given the high-risk, high-reward nature of the John Hancock Tax-Advantaged Dividend Income Fund (HTD), it's crucial for investors to consider their personal-finance situation and risk tolerance before investing in this fund, as its leveraged structure and dependency on utilities and financials sectors may amplify risks.
2. When planning for retirement or seeking to boost their income through investment, some investors might find the monthly dividend payouts offered by HTD appealing. However, they should be mindful of the risks associated with this fund, especially its sensitivity to interest rates and the use of leverage, to ensure that the potential returns align with their financial goals and investment objectives.
