Working out dividends
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So_Cynical
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Re: Dividends
You get the amount per share from the dividend announcement.
Then you multiply that by the number of shares you hold on the day before ex-div.
Can't be any easier.
Now, if you want to know the franking credits as well - that requires a teensy bit more numeracy.
First, you take the dividend multiplied by your number of shares..
Then, you divide that amount by 0.7, being the after-tax rate.
Subtract the amount of the first step, which leaves the tax the company has paid on your behalf.
If the dividend is only partly franked, multiply the franking credit by that fraction.
Example: You hold 2000 shares in company XYZ, which pays 14c dividend, 66% franked.
Step 1: 14c times 2000 shares = $280 goes into your pocket as dividend paid.
Step 2: Divide $280 by 0.7 = $400 grossed-up amount.
Step 3: Take away the dividend paid: $400 - $280 = $120 would be the full tax component
Step 4: The company only paid 66% tax, so $120 * 0.66 = $79.20 becomes your Franking Credit.
Simple enough.
You get the amount per share from the dividend announcement.
Then you multiply that by the number of shares you hold on the day before ex-div.
Can't be any easier.
Now, if you want to know the franking credits as well - that requires a teensy bit more numeracy.
First, you take the dividend multiplied by your number of shares..
Then, you divide that amount by 0.7, being the after-tax rate.
Subtract the amount of the first step, which leaves the tax the company has paid on your behalf.
If the dividend is only partly franked, multiply the franking credit by that fraction.
Example: You hold 2000 shares in company XYZ, which pays 14c dividend, 66% franked.
Step 1: 14c times 2000 shares = $280 goes into your pocket as dividend paid.
Step 2: Divide $280 by 0.7 = $400 grossed-up amount.
Step 3: Take away the dividend paid: $400 - $280 = $120 would be the full tax component
Step 4: The company only paid 66% tax, so $120 * 0.66 = $79.20 becomes your Franking Credit.
Simple enough.
Re: Dividends
sorry, I meant how can you work out how many dividends you get like per share etc? I read once there was a way of calculating dividends or some how.
sorry, I meant how can you work out how many dividends you get like per share etc? I read once there was a way of calculating dividends or some how.
Re: Dividends
thanks heaps for your information, just having trouble finding good materials to read and learn from and couldn't find any on dividends, may I ask what are franking credits or what does franked mean?
thanks heaps for your information, just having trouble finding good materials to read and learn from and couldn't find any on dividends, may I ask what are franking credits or what does franked mean?
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Re: Dividends
When a company makes a profit over the year (or half year), the Taxman holds his hand out for 30% of it. Well, it's 30% of the amount that's been earned within Australia. Profits from outside are a different matter.
That means, the dividend is paid out of income that has already been taxed by up to 30%. Therefore, it would be unfair for you, the shareholder, to be slugged another 30% or 45% or whatever your marginal tax rate is.
To overcome the imbalance, the dividend is first "grossed-up" by the tax that the company has already paid. The tax amount (in my earlier example, that would be $79.20) is then added to your income, but immediately credited as tax paid. This credit for tax paid is called "franking credit", because it comes off your tax bill at tax return time.
If your total taxable income is such that you pay tax at a higher rate, you only pay the difference over and above the franking credit. That way, the Taxman gets his pound of flesh as if you had earned the grossed-up amount. If your tax rate is less, you have paid too much tax on that grossed-up dividend - or rather: the Company has, on your behalf; so you get it back.
Dividends that are paid out of taxed income, meaning that carry a franking credit, are called "franked dividends" for short. If only a portion of the income, out of which dividends are paid, has been taxed, the dividend is called "partially franked" at x%.
That's about it in a nutshell.
With this newly-acquired knowledge, you can look at dividend records like this one: http://www.asx.com.au/asx/markets/dividends.do?by=asxCodes&asxCodes=anz&view=all and work out everything you need to know if you held, say, ANZ shares.
When a company makes a profit over the year (or half year), the Taxman holds his hand out for 30% of it. Well, it's 30% of the amount that's been earned within Australia. Profits from outside are a different matter.
That means, the dividend is paid out of income that has already been taxed by up to 30%. Therefore, it would be unfair for you, the shareholder, to be slugged another 30% or 45% or whatever your marginal tax rate is.
To overcome the imbalance, the dividend is first "grossed-up" by the tax that the company has already paid. The tax amount (in my earlier example, that would be $79.20) is then added to your income, but immediately credited as tax paid. This credit for tax paid is called "franking credit", because it comes off your tax bill at tax return time.
If your total taxable income is such that you pay tax at a higher rate, you only pay the difference over and above the franking credit. That way, the Taxman gets his pound of flesh as if you had earned the grossed-up amount. If your tax rate is less, you have paid too much tax on that grossed-up dividend - or rather: the Company has, on your behalf; so you get it back.
Dividends that are paid out of taxed income, meaning that carry a franking credit, are called "franked dividends" for short. If only a portion of the income, out of which dividends are paid, has been taxed, the dividend is called "partially franked" at x%.
That's about it in a nutshell.
With this newly-acquired knowledge, you can look at dividend records like this one: http://www.asx.com.au/asx/markets/dividends.do?by=asxCodes&asxCodes=anz&view=all and work out everything you need to know if you held, say, ANZ shares.
