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3 Frequently Asked Questions About Fully Franked Dividend Answered

For a lot of people, they do not have the qualifications to understand how finance works. Today, we’re going to be looking at a fully franked dividend which is the shares given from a business that has already paid the tax. Because of this, shareholders are authorised to receive credit from the tax that’s been paid from the company. As simple as this definition is, some people may still be scratching their heads at the idea. For those who are still confused, we’ll be giving you answers to the frequently asked questions in regards to a fully franked dividend. Let’s take a closer look!

3 Most Asked Questions

1# What is a fully franked dividend?

When you begin to invest, you will be spending a tiny fragment of ownership in the business. From small companies to major companies including the big banks or Woolworths, you get a piece of the profit of the business paid through a fully franked dividend. This is typically paid from the amount of the percentage per share. As an example, one business might pay a portion of money $0.16 per share. While this might appear to be little, if you possess 100 shares you’ll end up with $160 of the portions. Australians largely benefit from this as it is largely tax-friendly. Similar to people paying their annual income tax, businesses have to pay their yearly profits. These companies on average have to purchase a flat rate of 30% tax from their profits. This fully franked dividend is given to its shareholders.

2# Why Do Some Businesses Do Not Pay Fully Franked Dividends?

Some people do not benefit from franking credits the same way. As an example, a shareholder might receive a refund on their tax. Pensioners who are self-funded on the other hand, will have a good standing and receive maximum tax benefits. For some corporates, they’ll make most of their revenue from an income that is non-taxable. In the instances, it may not be possible for the company to pay full franked dividends. Despite this, most companies do pay fully franked dividends in order to ease the burden for their shareholders.

On the other hand, most businesses just starting out will bring back any profits into the business in order to help the company grow. Most investors are settled with this idea because while the company continues to grow, their share value will rise up with this. It is also highly important to understand that you cannot promise a fully franked dividend. Every company makes the final decision as to the amount the return is and if it will be paid in that year.

3# Is A Fully Franked Dividend Better Than An Unfranked One?

There is no short answer to this question. Although you can largely benefit from a fully franked dividend, it is essential for you to look for a highly experienced financial advisor. Because everyone’s circumstances are largely different it would be hard to determine whether one financial strategy is the best choice out of both options.

In Conclusion

A fully franked dividend is an important aspect of finance, especially when it comes to your enhancing investment portfolio. Jumping on this strategy depends on your particular situation, whereby it’s best to get a professional’s advice before making a decision. Depending on your current business standing, this can help you determine whether you are aiming to put your shares back to the business before giving them back to shareholders. After answering the three biggest questions surrounding this topic, we hope you’ve learnt something new and saved your money the right way!

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