This dividend share has the most franking credits on the ASX

New Hope Corporation Limited (ASX: NHC) offers the most franking credits on the ASX 200 as a proportion of market capitalisation.
The post This dividend share has the most franking credits on the ASX appeared first on The Motley Fool Australia. –

ASX dividend shares represented by cash in jeans back pocket

When it comes to ASX dividend shares, most income investors tend to focus on the trailing dividend yield a company has on offer at any one time. Sure, there is something to be said for a high yield.

Thus, it’s understandable that a company like Telstra Corporation Ltd (ASX: TLS), with its 16 cents a share dividend offering 5.23% yield, is arguably more attractive from an income standpoint than, say, Woolworths Group Ltd (ASX: WOW), which currently offers just 2.44% on current pricing.

But, almost uniquely in Australia, the dividend yield of an ASX share isn’t the only thing that matters for income investors. There’s also the franking credits. Franking is a system that most other countries don’t have. It means that shareholders of a company can be acknowledged for the tax ‘their’ company has already paid.

In the United States, for example, a company’s dividend is effectively taxed twice. That’s once at the corporate level, and once at the investor level as income tax.

But here in Australia, company dividends derived from a pool of Australia-taxed profits come with a ‘receipt’ for this tax. Shareholders can offset this against other income (or claim as a cash refund). These ‘receipts’ are known as franking credits, and they can significantly increase an ASX dividend share’s income potential.

ASX franking heroes

We already touched on how Telstra shares are offering a 5.23% yield on current prices. But Telstra’s dividend also comes with full franking credits. That means, if you include the benefits of this franking, Telstra’s grossed-up yield rises to a whopping 7.47%.

Franking credits are generated by paying corporate tax to the Australian Taxation Office (ATO). Thus, a company can effectively ‘stockpile’ franking credits if it doesn’t pay all of this taxed profit out at once.

And reporting from the Australian Financial Review (AFR) today reveals the company holding the most franking credits as a proportion of its market capitalisation on the ASX, according to Macquarie Group Ltd (ASX: MQG).

That company is coal miner New Hope Corporation Limited (ASX: NHC). The AFR reports that New Hope currently “has the equivalent of 44 per cent of its market cap [currently $1.2 billion] in franking credits”. However, it also notes that New Hope has declined to pay a final dividend in 2020. Although it did pay an interim dividend of 6 cents per share back in May. It seems shareholders might have to wait a little while until they can enjoy the benefits of New Hope’s franking pool.

The AFR also notes that BHP Group Ltd (ASX: BHP) has the most franking credits available out of any company in the S&P/ASX 100 Index (ASX: XTO), at 13% of market cap. What’s more, the AFR reckons that BHP is far better placed to return these credits to shareholders. That’s reportedly due to the strength of its balance sheet at the current time. Unlike New Hope, BHP has paid 2 dividends in 2020. It offers a trailing, grossed-up yield of 5.93% on current pricing.

These Dividend Stocks Could Be Your Next Cash Kings (FREE REPORT)

Motley Fool Australia’s Dividend experts recently released a brand-new FREE report revealing 3 dividend stocks with JUICY franked dividends that could keep paying you meaty dividends for years to come.

Our team of investors think these 3 dividend stocks should be a ‘must consider’ for any savvy dividend investor. But more importantly, could potentially make Australian investors a heap of passive income.

Don’t miss out! Simply click the link below to grab your free copy and discover these 3 high conviction stocks now.

Click Here For Your Free Stock Report

Returns As of 6th October 2020

More reading

Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Macquarie Group Limited and Telstra Limited. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post This dividend share has the most franking credits on the ASX appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!