A 5% dividend with tax paid is as good or better than 8% on deposits before tax. Look at inflation eating away at the cash deposit and capital gain (over time) on an investment. A wise investment beats cash deposit hands down.
First dividends today
- Thread starter kloid
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A 5% dividend with tax paid is as good or better than 8% on deposits before tax. Look at inflation eating away at the cash deposit and capital gain (over time) on an investment. A wise investment beats cash deposit hands down.
Bill M
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There is more to it than that. Firstly this correction has provided some good stocks at much lower prices. Lower prices means a much better dividend as you are paying less for the same stock and the dividend usually stays the same. Right now it is very easy to find good blue chip companies paying 6 to 7% fully franked dividends.
Look at these examples of fully franked dividends:
A dividend of 6.2% is 8.7% grossed up.
8.3% is 11.8% grossed up.
8.9% is 12.7% grossed up.
For me as an income investor it much better to buy a stock getting a 6% fully franked dividend than buying a term deposit that pays 8%. If you are buying good companies with increasing revenues then the share price has scope for price increases too.
Special dividends are a nice little something for nothing too. Occasionally these come along, usually when a company is doing well or has sold off a big part of their business. This is in addition to the already paid normal dividends.
There are other perks too. Some companies give a share holders benefits card that enable you to received up to 10% off goods from their company. Others wave you annual gold card fees which could be a $100 a year. Some banks will give you an extra .25% on term deposits and so on. I use to own shares in a hotel chain once and they gave me 2 nights a year for free in one of their hotels.
Another thing is those rights issues. Occasionally a company will need more cash to operate their business or reduce gearing so you get offered a juicy rights issue. Wesfarmers is doing that now, they are offering a 1 for 8 rights issue at a 20% discount to market price, new investors can't get this. I am a holder of Wesfarmers and I will gladly take up my rights issue at a 20% discount to market.
All in all for a tax advantaged income with some extra perks on top share investing is very hard to beat, cheers for now.
