Franklin ClearBridge Dividend Income
Mandate commentary
Q4 2025
Highlights
① The mandate delivered positive absolute returns in the last quarter of the year, supported by the performance of its holdings within the financials, utilities and health care sectors.
② Global growth strengthened as inflation eased, and policy turned supportive.
③ Equities and quality fixed income remain positioned for growth.
Mandate overview
The strong returns in Canadian and U.S. equity markets in 2025 were driven by a narrow leadership, where the materials sector led the Canadian market and the A.I. momentum drove the equity market south of the border. As a result, the mandate underperformed its benchmark. Primary detractors included the underweight to and poor security selection within the dividend-scarce materials and information technology sectors. This was further augmented by adverse security selection within communication services.
Conversely, the positive contribution to relative returns was led by the mandate’s overweight position in health care, security selection within the industrials sector and the lack of exposure to preferred shares.
Mandate: its diversification detracted
Performance contributors
Canadian Utilities Ltd: the overweight position was the top contributor to relative returns for a single security.
Brookfield Corp: the lack of exposure to this financials sector constituent was the second largest contributor to relative returns.
Performance detractors
Open Text: the overweight position in this information technology company detracted the most for a single security holding.
Barrick Mining: the lack of exposure to this primarily gold-producing large cap company was the second largest detractor by a single security.
Total gross returns:
Total return | QTD | YTD | 1YR | 3YR | 5YR | SINCE INC. (FEB. 18, 2025) |
FRANKLIN CLEARBRIDGE DIVIDEND INCOME | 1.84%
| 14.24%
|
Mandate repositioning
Economic growth is moderating but remains resilient. Corporate balance sheets are generally healthy, and recessionary conditions are not evident, yet higher capital costs and policy uncertainty are encouraging more cautious investment behaviour.
Against this backdrop, trading in the quarter reflected a continued emphasis on upgrading business quality and the consistency of long-term value creation, where valuations offered an attractive risk-reward. Rather than responding to short-term market momentum, capital was allocated selectively toward businesses with durable cash flows, proven capital allocation discipline and sustainable reinvestment opportunities.
Taken together, these changes reflect a portfolio shaped less by macro forecasts and more by valuation discipline and business quality. In an environment where higher rates and slowing growth are sharpening differentiation across equities, we continue to prioritize companies with durable cash flows, conservative balance sheets and the ability to compound value across market cycles.
Market overview: global growth strengthened, inflation eased, policy supportive
Markets ended the fourth quarter of 2025 on a strong note, capping a year defined by resilience and broad-based gains. Equities led performance, as investors looked beyond policy noise and focused on improving fundamentals. Global markets advanced, supported by steady corporate earnings, easing inflation pressures and a clear shift toward lower interest rates. Canada outperformed most developed peers, driven by strength in materials and financials, while European and Asian markets rebounded on firmer trade activity and renewed investor confidence. In the U.S., equity performance remained positive, led by technology and communication services, with improving breadth across sectors signalling a healthier market foundation.
Fixed income delivered modest but positive returns, as central banks continued to ease policy. Government yields declined on the short end while longer maturities remained stable, allowing coupon income to drive returns. Credit conditions stayed firm, underscoring the strength of corporate balance sheets entering 2026.
Market outlook: equities and quality fixed income positioned for growth
Entering 2026, global markets are positioned on a solid footing. Easing monetary policy and supportive fiscal conditions are expected to sustain growth across major economies. In the U.S., healthy earnings and productivity gains continue to anchor performance. Canada benefits from resource strength and steady financials, while Europe and Asia offer improving valuation opportunities through accelerating trade and industrial expansion. Fixed income markets provide renewed income potential as yields stabilize, and credit quality remains robust.
Overall, conditions favour a balanced, diversified approach.
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This commentary may contain forward-looking information, which reflects our or third-party current expectations or forecasts of future events. Forward-looking information is inherently subject to, among other things, risks, uncertainties and assumptions that could cause actual results to differ materially from those expressed herein. These risks, uncertainties and assumptions include, without limitation, general economic, political and market factors, interest and foreign exchange rates, the volatility of equity and capital markets, business competition, technological change, changes in government regulations, changes in tax laws, unexpected judicial or regulatory proceedings and catastrophic events. Please consider these and other factors carefully and do not place undue reliance on forward-looking information. The forward-looking information contained herein is current only as of December 31, 2025. There should be no expectation that such information will in all circumstances be updated, supplemented or revised, whether as a result of new information, changing circumstances, future events or otherwise.
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