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Thus a franked dividend of $0.70 plus $0.30 credit is exactly equivalent to an unfranked dividend of $1.00, or to bank interest of $1.00, or any other ordinary income of that amount. (It's exactly equivalent because franking is fully refundable, as described above.) Franked dividends are often described as a "tax effective" form of income.
A franking credit is income of the shareholder, though it is not received in cash. It is a credit towards tax that may be payable by the shareholder. Thus a franked dividend of $0.70 plus a $0.30 franking credit is equivalent to an unfranked dividend of $1.00, or to bank interest of $1.00, or any other ordinary income of that amount. (It is ...
The company may be taken to have paid a Division 7A dividend to the shareholder equal to the amount caught by the Division 7A rules, limited to the private company's distributable surplus. The ATO can include the balance as an unfranked dividend of the shareholder or, in certain circumstances, as a franked dividend.
A recipient of a fully franked dividend on the top marginal tax rate will effectively pay only about 15% tax on the cash amount of the dividend. In effect, when distributed as dividends, the profits of a corporation are taxed at the average of the shareholders' marginal tax rates; otherwise they are taxed at the corporate tax rate.
The Modigliani–Miller theorem states that dividend policy does not influence the value of the firm. [4] The theory, more generally, is framed in the context of capital structure, and states that — in the absence of taxes, bankruptcy costs, agency costs, and asymmetric information, and in an efficient market — the enterprise value of a firm is unaffected by how that firm is financed: i.e ...
The thesis of the Shareholder Yield book is that a more holistic approach, incorporating both cash dividends and net stock buybacks, is a superior way to sort and own stocks. It is important to include share issuance in the net stock buybacks equation as many companies consistently dilute their shareholders with share issuance often due to ...
In finance, Black's approximation is an approximate method for computing the value of an American call option on a stock paying a single dividend. It was described by Fischer Black in 1975. [1] The Black–Scholes formula (hereinafter, "BS Formula") provides an explicit equation for the value of a call option on a non-dividend paying stock. In ...
Whereas dividends are the cash flows actually paid to shareholders, the FCFE is the cash flow simply available to shareholders. [ 1 ] [ 2 ] The FCFE is usually calculated as a part of DCF or LBO modelling and valuation.