Franklin Income Fund Manager on Wealth Track

    Edward Perks, manager of Franklin Income Fund, was a recent guest on Wealth Track With Consuelo Mack. Here's a brief synopsis of a least part of what he had to say.

•     Franklin Income Fund is first and foremost about income and capital preservation.
•    It has paid a dividend monthly since 1948.
•    As a secondary goal it seeks value, which should in time lead to capital appreciation. It is able to maximize its ability to seek value by selecting investments from a very broad opportunity set. In fixed income it can purchase all the different types of bonds. When choosing equity securities, it can select from common stocks, preferred stocks, and convertible stocks.
• In response to a question from Consuelo, as to whether there exists now a "new normal" in which investors must be willing to accept a lower rate of growth, Perks acknowledged that lower bond coupon yields will lead to lower returns on bonds. He calls that fact "simple mathematics". He explains that he has been shifting his asset mix from bonds to stocks. He has gone from 55% bonds down to 40%. Because of higher stock dividends, he is now able to shift from fixed income to equity without sacrificing yield.
• Merck is cited as an example. Its current stock dividend is now greater that the coupon on its debt securities.
• Cash in the portfolio is held as close to zero as he can get it. He considers cash a drag on income.
• On an optimistic note, Perks believes that the ability to find income is actually improving. Lots of companies are increasing their dividend or initiating a dividend.
• Payout ratios are at multi-decade lows. Companies have been focused in recent years on building cash to shore up their balance sheets.  Now they are in a great position to increase dividends.
• Due to compelling valuations, he is beginning to look at tech. He has taken a position in Intel, for example.
• Top 5 Holdings in the fund are Merck, Wells Fargo, GE, Duke Energy, and BP.