Question of the week – franked dividends

Financial journalist and commentator on 3AW and Sky Business
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Q: Why is a fully franked dividend yield of 6.5% worth more in the accumulation and  pension phase of an SMSF? How do you work it out?

 

A: Augmented yields arise because fully franked dividend are grossed-up to the amount of $428.57 cents for every $1,000 of dividend income  ($1,000 + $428.57 = $1,428.57). The formula to calculate the franking credit is 'cash dividend + 30/70'. This is a franking credit based on the company paying tax at the company rate of 30%.

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