As the name implies dividend investing is about selecting shares that pay regular dividends. In Australia dividends are paid from company profits and will often have franking (tax) credits attached. The franking credits increase the value of the dividends and can even result in a personal tax refund, depending on the level of your taxable income for the year. The worst case is that franking credits will reduce your tax payable. What a wonderful world.
‘Dividend yield’ is a fundamental analysis of the value of a company dividend vis-a-vis the price of a company share.
Dividends can be ‘fully franked’, ‘partly franked’ or ‘unfranked’.
You need to take the franking value into account in order to work out the ‘gross (or grossed up) dividend yield’.
I am going to place a calculator here so that you can input net dividend, franking % and company tax rate % and share price. The calculator will show the grossed up dividend yield. I will then provide an input field for your personal marginal tax rate so that you can see the $ impact on your personal tax.