Rising interest rates have led to a steady decline in many fixed income investments, but the equity bear market means dividend stocks aren’t exactly safe either. The iShares Core U.S. Aggregate Bond ETF (AGG) is down more than 16% this year, while the Vanguard Dividend Appreciation ETF (VIG) is down about 18% over the same period.
The newly launched John Hancock U.S. High Dividend ETF (JHDV) could offer investors an income-generating safe haven during these uncertain times. With an actively managed approach, the fund seeks to identify securities with high and persistent dividends while managing sector exposure and other risks at the portfolio level.
See our Active ETFs Channel to learn more about this investment vehicle and its suitability for your portfolio.
A Unique Approach
Conventional bonds and dividend stocks are suffering, but the John Hancock U.S. High Dividend ETF targets a broader universe. In addition to common mid- to large-cap common stocks, the fund invests in preferred stocks, convertible securities, rights, warrants and real estate investment trusts (REITs) – creating more opportunities for investors.
The fund managers use a proprietary, systematic approach that involves screening for securities with high and persistent dividends or those with dividends expected to grow over time. These screens may include factors ranging from quality to dividend growth. After the initial screen, the managers optimize the portfolio based on beta and other factors.
“As the economy signals contraction and, in our view, the outlook for global growth over the next quarters continues to dim, investors may be considering investment strategies like JHDV to find diversification and income,” said John Hancock’s Co-Head of Retail Product, Steve Deroian, in a press release announcing the launch.
What’s in the Fund?
The John Hancock U.S. High Dividend ETF holds at least 80% of its net assets in dividend-paying, U.S.-based large- and mid-cap equity securities. With its focus on mid-cap equities, the fund may offer more diverse sources of income than conventional dividend ETFs that overwhelmingly focus on large-cap businesses.
The fund’s largest holdings include:
- Apple Inc. – 6.23%
- Microsoft Corp. – 5.00%
- ExxonMobil Corp. – 2.38%
- Prudential Financial Inc. – 2.19%
- Gilead Sciences Inc. – 2.19%
The fund holds a portfolio consisting of 85 securities, making it more concentrated than many passively managed alternatives. And with a net expense ratio of 0.34%, the fund is on par with many actively managed ETFs but significantly more expensive than some of its passive counterparts. Investors should keep these considerations in mind.
Alternatives to Consider
The John Hancock U.S. High Dividend ETF isn’t the only actively managed dividend-focused ETF. The Amplify CWP Enhanced Dividend Income ETF (DIVO) and the newly launched Touchstone Dividend Select ETF (DVND) are two other actively managed dividend ETFs – although, they have higher expense ratios.
In addition to dividend-focused ETFs, investors might also consider actively managed income ETFs, such as the First Trust TCW Opportunistic Fixed Income ETF (FIXD) or the First Trust Tactical High Yield ETF (HYLS). These funds focus on identifying other niche corners of the market where excess income opportunities exist.
The Bottom Line
Rising inflation and interest rates have hurt fixed income and dividend-focused investments. As a result, investors may want to look toward funds that go beyond the passive management approach and build risk-averse portfolios with optimal yield. And the newly launched John Hancock U.S. High Dividend ETF might just fit the bill.
Take a look at our recently launched Model Portfolios to see how you can rebalance your portfolio.
