"[The] FTSE price to earnings ratio is at the most attractive level, in terms of value, for 20 years," he said. "An income strategy should give investors confidence. The chances of a return over the next five years are very good. This is one of the best times to invest in the stock market that I have seen."
Clark is invested in some of the major blue chip dividend payers because he feels they are best positioned to cope with any downsides in the market.
"We’ve found the best value in companies like GlaxoSmithKline, Vodafone and Imperial Tobacco. Starting yields are high – 4.3 per cent in Imperial and 5.5 per cent in Vodafone – and they are defensive companies where you can rely on the earnings stream."
"I’ve been worrying less about the sustainability of the fund’s yield than I was in 2008. Now, while there is a concentration of income in the UK market, the sources of income in the fund are pharmaceuticals, utility names and tobacco," he explained.
"I don’t see a problem with their ability to reward investors. They have good income streams, they have large cash reserves and I don’t see them slashing the dividend."
"I’ve felt we probably wouldn’t get a double-dip but we will get slower growth than expected. There was a rush to reopen industries following the recession, which raised expectations, but we are only getting back to normal. In a low-growth environment we would do well because we are invested in defensive sectors."
According to data from FE Analytics, the Fidelity Enhanced Income fund is in the top-quartile for performance in its sector. Over the last year it has returned 0.85 per cent while the average UK Equity Income fund has lost 3.12 per cent.
Performance of fund vs sector over 1-yr
Source: FE Analytics
Clark is particularly pleased with the way the fund has managed risk. While it has achieved a consistent yield of around 7 per cent, the volatility score over one year is just 9.2 per cent. Only Francis Brooke’s Trojan Income fund is less volatile over the period.
"Low volatility is a real focus of this fund," said Clark. "With our strategy we ask how sustainable a company’s dividend is for the tough times we are going to go through. The key analysis is of the safety of the income at a reasonable price."
The team at Fidelity is able to keep volatility low and boost yields through the use of covered call options.
"Covered call overwriting is an efficient strategy to significantly increase income," Clark continued. "BG Group – our highest-conviction position – has a higher weighting in the Enhanced Income fund than in the Income Plus fund because we can take better positions with covered call options and we think it has better chances of capital growth."
"I think we can look forward with some confidence to the future, the returns and low volatility will continue," Clark finished.