John Hancock Premium Dividend Fund: A Closer Look at Its Distribution Sources

As an investor, it's crucial to understand the sources of a fund's distributions, especially when considering income-focused investments like the John Hancock Premium Dividend Fund (PDT). This closed-end fund, managed by John Hancock Investment Management LLC and subadvised by Manulife Investment Management (US) LLC, has a managed distribution plan that pays a fixed monthly distribution of $0.0825 per share. Let's dive into the sources of PDT's distributions and analyze its performance.



PDT's distribution sources can be broken down into four main categories: net investment income, net realized short-term capital gains, net realized long-term capital gains, and return of capital or other capital source. The following table illustrates the estimated sources of PDT's current distribution and the cumulative distributions paid this fiscal year:

| Source | Current Distribution ($) | % Breakdown of the Current Distribution | Total Cumulative Distributions ($) | % Breakdown of the Total Cumulative Distributions |
| --- | --- | --- | --- | --- |
| Net Investment Income | 0.0680 | 82% | 0.4787 | 58% |
| Net Realized Short-Term Capital Gains | 0.0000 | 0% | 0.0000 | 0% |
| Net Realized Long-Term Capital Gains | 0.0000 | 0% | 0.0000 | 0% |
| Return of Capital or Other Capital Source | 0.0145 | 18% | 0.3463 | 42% |
| Total per common share | 0.0825 | 100% | 0.8250 | 100% |

As you can see, the majority of PDT's current distribution comes from net investment income, with a smaller portion from a return of capital or other capital source. The fund has not realized any short-term or long-term capital gains in the current distribution period.



PDT's distribution sources have varied over time, with net investment income being the primary source in most periods. However, the fund has also distributed a significant portion of its distributions as a return of capital in some periods. This return of capital distribution does not necessarily reflect the fund's investment performance and should not be confused with "yield" or "income."

PDT's performance has been mixed, with an average annual total return (in relation to NAV) of 5.15% for the 5 years ended on July 31, 2024. The fund's annualized current distribution rate expressed as a percentage of NAV as of July 31, 2024, was 7.66%. However, the cumulative total return (in relation to NAV) for the fiscal year through July 31, 2024, was 30.27%, indicating a strong performance for the year.

In conclusion, the John Hancock Premium Dividend Fund's distribution sources are primarily net investment income, with a smaller portion from a return of capital or other capital source. The fund's performance has been mixed, with a strong annual return but a lower average annual total return. Investors should consider PDT's distribution sources and performance when evaluating the fund as an income-focused investment option.