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Where Smart Money Is Hunting for Yield as Money-Market Rates Collapse
As the Federal Reserve continues to cut interest rates, money-market yields are sliding (the Crane 100 Money Fund Index now sits at 3.95%, down sharply from over 5% a year ago), pushing more investors to look again at dividend-paying stocks for sustainable income.
One fund that has consistently delivered in this environment is the Franklin Equity Income Fund (FISEX), a four-star Morningstar-rated strategy that ranks in the top quintile for total returns both in 2024 and year-to-date 2025.
Key performance (as of late September 2025, per Morningstar):
2025 YTD total return: +13.8%
2024 total return: +18.0%
30-day SEC yield: 1.27%
Net expense ratio: 0.83%
Lead portfolio manager Matt Quinlan emphasizes high-quality, market-leading companies that are “continuously investing, innovating, and expanding” — businesses that are becoming more defensible and durable over time, even if their starting dividend yield is modest.
Why dividend stocks are gaining attention again
While money market funds still pay more today, their yields are expected to keep falling with additional Fed cuts (two more 25 bps cuts are currently priced in for 2025). Dividend equities, on the other hand, offer:
A growing income stream (many of the fund’s holdings consistently raise payouts)
Capital-appreciation potential that cash-like instruments can’t provide
Historically better risk-adjusted returns when rates decline
How the fund boosts yield and lowers volatility
Quinlan doesn’t just buy plain-vanilla common stocks. To enhance income and dampen swings, the portfolio also uses:
Equity-linked notes (currently ~9% of assets, capped at 10%) → Debt instruments tied to an underlying stock that deliver higher yield with lower volatility. The team often pairs these with a direct position in the same equity for a “hybrid” higher-income, lower-risk exposure.
Convertible preferred securities (currently ~5% of assets) → Typically 3-year maturities yielding around 6%, issued by companies the team loves on the equity side. These provide attractive income plus upside participation if the stock rises.
Where Quinlan sees the best opportunities right now
Financials — the sector’s largest overweight
Rising capital-markets activity
Expected deregulation under the new administration
Strong dividend growth after banks easily passed recent stress tests → Top holdings: JPMorgan Chase and Morgan Stanley
Industrials
Reshoring/onshoring trends
Infrastructure spending
Continued growth in air travel and aerospace
Boom in data-center construction → Notable positions: Eaton and Parker-Hannifin
Bottom line
In an environment where “safe” cash yields are fading fast, the Franklin Equity Income Fund offers a compelling mix of high-quality equity exposure, an attractive (and growing) income stream, and deliberate volatility reduction through structured notes and convertibles.
For investors who want income without chasing the highest starting yield— and who believe we’re still in a long-term bull market for quality companies — FISEX has been one of the quiet standouts of 2025 so far.
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