John Hancock’s payout blends gains and a sliver of return-of-capital — what shareholders need to know

Board OKs a $0.65 distribution, payable Dec. 31 with a Dec. 11 record date

John Hancock Financial Opportunities Fund (BTO) told shareholders it will pay a quarterly distribution of $0.65 per share on Dec. 31 to holders of record as of Dec. 11. The notice said the payout is being made under the fund’s managed distribution plan and in reliance on the SEC exemptive order that allows certain closed-end funds to smooth distributions over time.

Where the $0.65 came from: a breakdown in dollars and percentages

The fund gave a line-by-line breakdown for the $0.65 distribution. Most of the cash — about 74% of the payment — comes from long-term capital gains. Roughly 22% is funded by net investment income, and the remaining small slice, around 4%, is classified as a return of capital (ROC).

Put another way, the distribution divides approximately into $0.48 of long-term capital gains, $0.14 of net investment income, and $0.03 of return of capital. The fund also disclosed fiscal-year-to-date cumulative figures showing the same proportions across distributions so far: on a $2.60 total paid year-to-date, roughly $1.92 is long-term gains, $0.57 is net investment income and $0.11 is return of capital.

The table the fund supplied makes clear the payout mix and keeps the emphasis on realized gains rather than ongoing portfolio income.

Tax and return-of-capital takeaways: what shareholders should expect come 1099-DIV season

Shareholders should expect a 1099-DIV that breaks the distribution into ordinary income, capital gains and return of capital. The fund usually issues those forms around tax season, typically by mid‑February.

Return of capital is not taxable when paid; it reduces the investor’s cost basis in the shares. That means future capital gains could be larger when you sell, because your taxable gain is measured from the reduced basis. If ROC reduces basis to zero, any further ROC becomes taxable as capital gain in the year it’s reported.

Classifying part of a payout as long‑term capital gain is friendlier for many taxable investors because long‑term gains are usually taxed at lower rates than ordinary income.

NAV performance and distribution rate: 5‑year track and the short-term view

The fund highlighted a five-year NAV total return of 14.39% and said the annualized distribution rate is roughly 7.35% of NAV. Year‑to‑date NAV total return stands at 6.67% through the period the notice covers.

Those figures show two things: first, the fund has produced positive NAV returns over the medium term; second, the distribution rate is a meaningful yield relative to NAV. The fund also warned shareholders not to read the distribution amount alone as a signal of ongoing cash generation — managed distribution plans can smooth payments even when current income falls short, by drawing on gains or returning capital.

Practical next steps for shareholders — monitoring ROC, discounts, and tax detail

Investors who own BTO should double-check three practical items: confirm your cost basis on brokerage statements after any ROC is reported; review the final 1099‑DIV when it arrives to see how the IRS categories are assigned; and watch how the fund’s market price behaves relative to NAV after the payment.

Managed distribution plans can keep a steady cash flow but also lead to situations where NAV is carried lower over time if distributions consistently exceed new income. That can widen the fund’s premium or discount to NAV and affect total return. Liquidity around the record and pay dates can tighten, so trading spreads sometimes widen during these windows.

Where BTO sits with peers and why the source of distributions matters

Across closed‑end funds, managed distribution plans are common. The difference that matters to investors is the source of the payout. Funds that pay mostly from net investment income are generally easier to read as ongoing yield plays; funds that rely heavily on realized gains or ROC are effectively recycling capital and may be less predictable over time.

With roughly three‑quarters of this distribution labeled as long‑term capital gains and only a small ROC component, BTO’s latest payout looks like a distribution driven by realized gains rather than steady income. That is a reasonable setup for the quarter, but it also means future payouts will depend on the fund’s ability to realize additional gains or generate income, and investors should factor that into yield comparisons with peer funds.

If shareholders want further detail on the tax table or the fund’s managed distribution plan mechanics, the fund’s investor relations is the right place to call for the official breakdown and timing.

Sources

• prnewswire.com