Manulife North American Dividend Income
Mandate commentary
Q3 2026
Highlights
① Stock selection within industrials and health care detracted from performance but was offset in part by positive selection in energy.
② Earnings growth provided a powerful tailwind for equities.
③ Inflation, energy costs pushed long-term yields higher.
Mandate overview
During Q3 2026, the fund modestly trailed its benchmark. Stock selection in the industrials and health care sectors detracted from performance, as several holdings declined during the quarter. In contrast, stock selection in the energy sector contributed positively to returns, supported by strong performance across energy-related holdings.
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 in Q3
Performance contributors
Microsoft – The position contributed positively, as strong Azure growth, expanding AI adoption and better-than-expected earnings lifted investor sentiment.
Suncor – The position contributed positively, as stronger energy prices and resilient oil demand supported performance during the quarter.
Performance detractors
Caterpillar – This position detracted, as tariff concerns, higher costs and slowing construction activity weighed on margin and demand expectations.
Alimentation Couche-Tard – This position detracted, as concerns about softer consumer spending and weaker traffic trends weighed on the shares.
Total gross returns:
Total return (CAD) | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18 2025) |
MANULIFE NORTH AMERICAN DIVIDEND INCOME | 1.86
| 14.02
| 14.37
| 12.24
|
Mandate positioning
During the quarter, we initiated positions in TC Energy and United Rentals, both of which align well with our Business Value Creation framework. TC Energy offers strategically important infrastructure assets, predictable cash flow generation and an attractive runway for growth, as North American natural gas demand expands. United Rentals is the industry leader in equipment rentals, benefiting from scale advantages, pricing power, strong free cash flow generation and disciplined capital allocation.
To fund these additions, we exited Dollarama and Trane Technologies following periods of strong performance. While both businesses remain fundamentally sound, we believed capital could be deployed more effectively into opportunities with greater upside potential.
Overall, we believe the portfolio remains well-positioned with high-quality businesses, strong balance sheets, diversified sources of business risk and a lower beta and volatility profile relative to the benchmark.
Market overview: earnings growth provided a powerful tailwind for equities
The third quarter showed that the current business cycle still has support, but risks have shifted. Growth held up, earnings improved and corporate investment remained firm, but higher oil prices, persistent inflation and rising long-term yields made the path forward less certain. Equities advanced as earnings provided fundamental support, even as higher rates raised the bar for further gains.
Canadian equities benefited from gains in resources and financials. Higher oil prices supported energy, while precious-metals companies were among the strongest performers. Bank earnings were supported by capital-markets activity, trading income and contained credit costs. U.S. equities also advanced, supported by strong earnings and continued technology investment. Higher yields weighed on more rate-sensitive areas.
International markets remained constructive overall, with parts of Asia benefiting from continued demand across the AI technology supply chain. Fixed income faced greater pressure as rising government bond yields outweighed coupon income, while credit remained comparatively resilient. Across markets, the central tension increasingly became earnings strength versus higher inflation and interest rates.
Market outlook: inflation, energy costs pushed long-term yields higher
With the recent earnings strength, the bar for market performance is higher. U.S. valuations are at the upper end of their historical range and have come under pressure from higher bond yields. Investor sentiment points to strong earnings growth going-forward, which could support equities in the near term, but the magnitude of gains may be muted.
The U.S. Federal Reserve and Bank of Canada each face two rate decisions this year, and persistent inflation has shifted central banks toward a tighter policy stance. Long-term yields remain a pressure point for equities, while also improving the income available from bonds.
The U.S. midterms may add to market volatility, but the path forward will be shaped by the economic cycle, inflation and interest rates.
To discuss your investment strategy, speak to your IG Advisor.
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