What are dividends?
- Thread starter Chaka1988
- Start date
- Joined
- 2 September 2008
- Posts
- 1,038
- Reactions
- 1
Re: Some info regarding dividens
We own a company XYZ limited, making widgets.
There are two shareholders, you (chaka) and i (beamstas)
In the first year, XYZ limited makes a profit of $1
They pay income tax on the $1 of 30% (it's not 30% but for simplifiying we will say it is)
There is now 70c left
We both get half share each of the profit (35c each) as a fully franked dividend. The franking credit will be 15c ((35/7)*2).
So you receive 35c CASH+15c TAX CREDIT each
= the $1 profit.
So a dividend is basically a split of company profits between the shareholders.
We own a company XYZ limited, making widgets.
There are two shareholders, you (chaka) and i (beamstas)
In the first year, XYZ limited makes a profit of $1
They pay income tax on the $1 of 30% (it's not 30% but for simplifiying we will say it is)
There is now 70c left
We both get half share each of the profit (35c each) as a fully franked dividend. The franking credit will be 15c ((35/7)*2).
So you receive 35c CASH+15c TAX CREDIT each
= the $1 profit.
So a dividend is basically a split of company profits between the shareholders.
- Joined
- 6 December 2007
- Posts
- 436
- Reactions
- 0
Re: Some info regarding dividens
There is no average and dividends can and will also change depending on many different situations.
So what a company has payed in the past doesn't mean they will continue to pay that same amount or if they will pay anything at all.
Many companies this year have reduced or suspended paying a dividend due to the harder economic climate.
This link will allow you to have a look at what companies have paid in the past.
http://www.asx.com.au/asx/markets/dividends.do
There is no average and dividends can and will also change depending on many different situations.
So what a company has payed in the past doesn't mean they will continue to pay that same amount or if they will pay anything at all.
Many companies this year have reduced or suspended paying a dividend due to the harder economic climate.
This link will allow you to have a look at what companies have paid in the past.
http://www.asx.com.au/asx/markets/dividends.do
Julia
In Memoriam
- Joined
- 10 May 2005
- Posts
- 16,986
- Reactions
- 1,973
Chaka, it might be a good idea for you to go to the ASX website, www.asx.com.au, where they have an extensive education section.
Best to do some reading about the basics.
Best to do some reading about the basics.
- Joined
- 6 August 2009
- Posts
- 344
- Reactions
- 1
say you have 100 NAB shares... they pay a fully franked div... you receive $97 which NAB have already paid the tax on (i.e. 30%) therefore you receive a tax credit of $41
DRP = Dividend Reinvestment Plan
BSP = Bonus Share Plan
if you allect to enter the DRP that means instead of actually paying you the $97, the $97 (or some part of it, determined by you) will be used to buy more NAB shares at a price determined by NAB
and relatively the same for BSP
- Joined
- 6 August 2009
- Posts
- 344
- Reactions
- 1
good idea julia
i'm sure you'd be able to find it on the NAB website to... which begs the question - why ask here?
Umm.. because its a beginners lounge and they are here to learn.
You receive a franking credit because the company has already paid tax on the D/E.
Please refer this link for a more detailed info on dividends
http://www.asx.com.au/programs/vignettes/lesson2part3.html
and this link might answer other questions regarding shares
http://www.asx.com.au/resources/education/index.htm
- Joined
- 6 August 2009
- Posts
- 344
- Reactions
- 1
the number $41 is the fully franked dividend x 30/70 (30= tax rate, 70 = net amount of franking)
$97 x (30/70) - which tells me the amount of tax the company paid on your dividend.
i.e. the company would have paid tax on $138 profit per 100 shares
$138 x 30% = 41
so you get $138 - 41 = 97 as a fully franked dividend
- Joined
- 6 August 2009
- Posts
- 344
- Reactions
- 1
because the company has already paid tax on the profits they made - which they then distribute to you
you get the credit because otherwise the govt would be taxing that money twice
i.e. $138 * 30% = one lot of tax for govt from the company
$97 * 30% (assuming that's your marginal rate) = one lot of tax from the same money from you
if that was the case the govt has taxed that money by 51% if they didnt give you the credit
- Joined
- 6 August 2009
- Posts
- 344
- Reactions
- 1
well, no.
you get $97 in the hand.
the company has made $138 in profit for your 100 shares... they pay $41 in tax on that money, then they give you the remainder.
if they had have paid an unfranked dividend they would have given you $138, but they paid the tax ($41) on the $138 on your behalf and THEN gave you the remaining $97
BUT on your tax return you have to add BOTH the $97 AND the $41... but then the $41 gets reduced from your tax bill at the end anyway because the company has already made that payment for you.
- Joined
- 6 August 2009
- Posts
- 344
- Reactions
- 1
they'll post you a cheque
Oh. Cheers for your help. Now I can tick dividens as mission accomplished
Another question: Let's say I do the divident reinvestment plan with a 10% discount, the shares are selling at $100, while my total dividend is $160. So I get my one share, plus $70 is going to be reinvested with the next dividend.
But suppose I sell, what happens to that $70? Or what if I sell, but buy back in time for the next dividend. While this $70 still be sitting there, waiting, or will it dissapear in some bookkeeping magic?
But suppose I sell, what happens to that $70? Or what if I sell, but buy back in time for the next dividend. While this $70 still be sitting there, waiting, or will it dissapear in some bookkeeping magic?
