Manulife North American Dividend Income
Mandate commentary
Q1 2026
Highlights
① Underweight to the materials sector and security selection in both information technology and industrials detracted from performance.
② The oil shock drove turbulence, as commodities dominated inflation fears.
③ Global growth expectations will be adjusted if conflict extends beyond summer.
Mandate overview
During Q1 2026, the fund modestly trailed the benchmark. An underweight in gold and precious metals was a headwind as the group outperformed, and several holdings in the information technology sector, particularly related to the software and IT services industry, detracted from returns.
We maintained our disciplined focus on business‑risk diversification, balance sheet strength and prudent position sizing. This approach continues to deliver a lower‑beta, lower‑volatility profile versus the benchmark, though it can lag during brief, factor‑driven rallies. We believe the fund is positioned to compound capital through cycles while protecting against adverse shocks.
Mandate: underperformed the benchmark over Q1.
Performance contributors
Suncor Energy: Suncor was helped by a supportive commodity backdrop; oil prices spiked in March amid a major Middle East supply disruption, boosting cash-flow expectations for integrated producers. Company execution reinforced the move, with record upstream production and refining throughput/utilization and continued sizable dividends and buybacks, supporting confidence in free funds flow durability.
Canadian Natural Resources: Canadian Natural Resources also benefited from stronger oil pricing into March, as perceived supply tightened. It further enhanced its shareholder-return appeal by raising its quarterly dividend and emphasizing strong operational/financial momentum in year-end results, contributing to a positive re-rating during the quarter.
Performance detractors
Constellation Software: Constellation faced multiple pressures, as investors worried about AI disruption weighing on higher-multiple software compounders. Weakness intensified after Q4/2025 results; revenue rose (aided by acquisitions), but net income fell sharply, and earnings missed expectations, largely due to a one-off non-cash/fair-value related impact.
Microsoft Corp: Microsoft derated after fiscal Q2, as investors focused on moderating Azure growth, outsized AI-related capital expenditure and lighter margin guidance, raising questions about near-term ROI. The move was amplified by a broader software/mega-cap tech sell-off tied to AI disruption worries and elevated expectations.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18 2025) |
MANULIFE NORTH AMERICAN DIVIDEND INCOME | -0.26
| -0.26 | 9.14 | 4.84
|
Mandate repositioning
The portfolio management team has not changed its positioning this quarter. They believe that the portfolios are well-positioned to deliver absolute returns and provide uncorrelated business risk diversification.
Market overview: oil shock drove turbulence, commodities dominated inflation fears
The first quarter of 2026 began with supportive economic momentum; improving manufacturing, a stabilizing U.S. housing backdrop and contained inflation. However, this quickly pivoted as the conflict in the Middle-East involving Iran — along with trade disruption around the Strait of Hormuz — pushed energy commodities higher. The energy shock drove volatility across global equities, yet the underlying backdrop proved more resilient than headlines implied, reinforcing the value of diversification.
Canadian equities were resilient, as higher crude oil prices supported the energy sector and helped offset weaknesses in rate-sensitive areas. Defensive sectors, dividends and real-asset exposure provided additional insulation versus many global peers. U.S. fundamentals remained solid, but sentiment weakened as oil lifted inflation expectations. Investors rotated away from expensive, rate-sensitive growth stocks, making performance more about a valuation reset than deteriorating earnings.
Market outlook: global growth expectations will be adjusted if conflict extends beyond summer
Looking ahead, oil and energy prices remain the central swing factor. A credible path to de-escalation could shift attention back to the positive economic cycle evident early in the quarter; a prolonged disruption would maintain inflation uncertainty and elevated volatility.
In this environment, commodity producers and value‑oriented equities may provide resilience, while long‑duration assets and oil‑importing regions face greater sensitivity to energy-price fluctuations.
Diversification and flexibility remain central to portfolio construction
Canadian equities offer exposure to energy and materials supported by global supply constraints. International developed and emerging markets present valuation‑driven opportunities and help diversify away from concentrated U.S. equity exposure.
Within fixed income, short‑ to intermediate-duration strategies can balance yield and interest‑rate risk, complemented by high‑quality corporate bonds for disciplined income generation. Key areas to watch will be central bank policies, as they look at the impact of higher energy costs and their indirect tax on the consumer.
To discuss your investment strategy, speak to your IG Advisor.
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