Dividends

The all important settlement or closing date is when a transaction is finalised. Share trading is like buying or selling property, you buy the house but don't actually own it until after closing. The seller also does not get the money until the closing date. On the settlement date, a seller collects money and gives up stock ownership while the buyer pays for the securities and becomes the official shareholder.

A franking credit is a unit of tax paid by companies in countries with a dividend imputation system. The Australian simplified imputation system started on 01 July 2002 which allows that only frankable distributions may be franked.

Who can frank credits?

Australian resident companies, corporate limited partnerships, corporate unit trusts and public trading trusts are franking entities. Mutual life insurance companies are excluded from issuing franking credits.

What distributions can be franked?

How long you want to own your shares will depend on what's your goal. If you bought a fully franked stock and want to receive the full dividend amount, you have to hold the stock for 45 days. This excludes the day you made the purchase and the day you sold the stock. More importantly the 45 day rule (plus 2 days) makes you eligible to receive franking credits, if your imputation credits entitlement totals more than $5000. The key is to own the shares in 45 days after the ex-dividend date. You will need 90 days for preference shares.

In Australia, franked dividends is the practice of issuing a dividend with a personal tax credit attached. Franked dividends serve the purpose of avoiding the anomaly of double taxation of dividends. The amount of the tax credit depends upon the issuer's tax rate and the amount of the dividend.

Dividends are distribution payments made by a public company to its stockholders. It's a portion of company profits paid out to shareholders. When the company earns a profit, that money can be put to two uses: it can either be reinvested back into the business, or it can be paid to the shareholders as a dividend. With dividend imputation, if a company pays company tax, the dividends carry a tax credit which can be offset against your tax liability on the dividends. If the company pays the full company tax rate, the dividends are fully franked.

The dividend yield strategy is simply this: buy the stock before the exdividend. Hold it until the ex-dividend date. Sell the stock. Rinse and repeat to receive the dividend and the franking credits. (However, you may need to hold the shares for at least 45 days to be eligible to receive franking credits. This rule doesn’t apply if your total franking credit entitlement is less than $5,000 in one year.

Dividend Yield Case Study

For Australian traders and investors, only two dates are important: the ex date (or the ex dividend date) and the payable date (or payment date). For companies, the dates important to them are the closing date (or the record date) and the payable date.

Company Declares a Dividend

When an Australian public company declares a dividend, it also announces as books closing date (or record date). All the shareholders of the company who are listed on the shares register will be entitled to receive the dividend.

Here is a table of the ASX Dividend Calendar for the next couple of months. This calendar include public companies which are listed on the Australian stock exchange.

Dividends are payments made by a corporation to its shareholder members. It is the portion of corporate profits paid out to stockholders. When a corporation earns a profit or surplus, that money can be put to two uses: it can either be re-invested in the business (called retained earnings), or it can be paid to the shareholders as a dividend. With dividend imputation, if a company pays company tax, the dividends carry a tax credit which can be offset against your tax liability on the dividends. If a company pays the full company tax rate, the dividends are fully franked.

Find out the upcoming dividends in Australia in our calendar. If you are a shareholder of a company you are entitled to a share of the company's earnings and profits. A dividend payout is a way to reward shareholders for investing their money in that company.