March 21, 2014

A reliable and decent source of income is hard to find but this week’s guest runs the venerable Franklin Income Fund, which has paid a monthly dividend since 1948. Perks, whose fund can invest in stocks, bonds, and other income producing investments, will tell us where he is finding the best income now.

WEALTHTRACK Episode #1039; Originally Broadcast on March 21, 2014

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Ed Perks

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Director of Portfolio Management, Franklin Equity Group
Portfolio Manager, Franklin Income Fund Consuelo MackWhat were the key takeaways from Janet Yellen’s first FOMC meeting and press conference as Federal Reserve Chair? According to veteran Fed watchers Andy Laperriere and Roberto Perli at Cornerstone Macro, there were several. First, “the Yellen Fed is not as dovish as the market thinks.” In fact, short-term interest rates are probably going to be raised sooner than expected- maybe as early as April of next year- which would be six months after the expected end of the Fed’s quantitative easing policies in October. The rate hikes will be gradual, say about 25 basis points every other FOMC meeting. And policy makers will consider all economic data to determine when the hikes begin. As the Cornerstone Macro team put it: “the reality is that she (Yellen) is a very pragmatic person that makes decisions based on data, not ideology.”

The search for investment income has already become a little less frantic. Interest rates began to rise in recent months. Ever since 2008, when the Federal Reserve lowered short-term interest rates to near zero and embarked upon its government bond buying binge to suppress longer- term rates, investors have been scrambling. Yields on U.S. Treasuries and investment grade bonds, the traditional conservative choices for reliable interest payments, plummeted and investors were forced to look elsewhere. They flocked to more risky areas, including common stocks, where several times in the last year and a half dividend yields actually topped those of 10-year treasuries and corporate bonds. That unusual trend appears to be over.

In recent months bond yields have started to tick up, once again offering somewhat higher income than their stock equivalents.  According to this week’s guest, the pick- up in bond yields means more opportunities for investors seeking income.

He is Ed Perks, Director of Portfolio Management at the Franklin Equity Group and  since 2002,  portfolio manager of the venerable Franklin Income Fund. The fund has paid a monthly dividend ever since its founding in 1948. The nearly $90-billion fund, which can invest in stocks, bonds and other income producing investments, is one of the top ranked funds for the last 10, five and three year periods in its Morningstar “conservative allocation” category.

Since PBS has just finished 3 weekends of pledge drives, preempting WEALTHTRACK in many markets, you might have missed some of the EXTRA features we did exclusively for our website.  A fascinating one last week was my interview with David Nadel about India. Nadel is Portfolio Manager and Director of International Research at Royce Funds, the small cap pioneers. He explains why after 3 trips to the world’s most populous democracy he is investing in many Indian businesses. The interview and his white paper, “What Columbus Missed: Royce Rediscovers India” are available on our website.

Have a great weekend, a happy spring and make the week ahead a profitable and productive one!

Best Regards,

Mathews Asia

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Southern Company (SO)
Price: $42.79 on 3/19/14
52-week range: $40.03 – $48.74
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“Now I think the utility industry you have to be careful. It’s not the utility industry it was several decades ago. There are a lot of different business models but that yield-oriented, stable cash flows of a Southern company or of a Duke Energy I do find quite appealing and a nice long-term holding for a portfolio focused on income.”

– Ed Perks

Stock mentions in this episode:
Merck & Co. Inc. (MRK)
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Royal Dutch Shell PLC ADR Class A (RDS)
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General Electric Co. (GE)
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Dow Chemical Co. (DOW)
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E.I. du Pont de Nemours & Company (DD)
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BHP Billiton Ltd. ADR (BHP)
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Rio Tinto PLC ADR (RIO)
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Southern Co. (SO)
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Feburary 15, 2013

Perks & de Lardemelle: Income vs. Protection With Two Leading Fund Managers

Franklin Income Fund has delivered monthly payments to shareholders since 1948! Portfolio manager Edward Perks explains how he is carrying on the tradition. Plus IVA Worldwide Fund’s Charles de Lardemelle explains where he is finding value and protection around the world.


Ed Perks: Investment Kicks?

Running the $90 billion Franklin Income Fund means carrying on a 65 year old tradition with a very specific mandate. Does Portfolio Manager Ed Perks feel the need to do anything different, for kicks, with his personal portfolio?

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