Dividend

Companies have the option in when they are going to pay their dividends. This is important for shareholders who have a stake in the company, but as a trader what does this mean to you?

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.

The stock market is an unpredictable world, profits can soar and drop like dead weight in a matter of minutes. Traders employ their own personal tactics and make profit as much as they can. With a consistent strategy, any John Doe can make money in the stock market. One of the most popular gearing form is instalment warrant, coupled with dividend yield play you can make some smart moves at a fraction of the cost.

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.