This post is specifically for SMSF investors in pension mode. If your marginal tax rate is zero and you can claim franking credits back from the tax office, RHG looks like a lay down misere.
On Thursday RHG will trade ex a fully franked dividend of $0.79. For super funds not subject to tax, you can buy it at today’s price of $1.24, collect $0.79 in cash on 2 June and another $0.34 for the franking credit when you submit your tax return (as early as July if you are organised). That means you’ll have $0.11 left invested in RHG. I think the shares will trade somewhere between $0.25 and $0.35 after it goes ex-div and are potentially worth as much as $0.60 long-term, plus a few more franking credits that will be generated along the way.
Over the past few months I’ve seen a number opportunities where franking credits are being substantially undervalued, but none quite as good as this.
Note that it is difficult to get meaningful portfolio exposure to the ex-dividend RHG. Say you wanted to end up with a 5% position in the company, you would have to have enough cash to invest 55% of your portfolio in the stock today (the other 50% will come straight back as dividend and franking credits). Not many investors will have that much flexibility. And, as always, get your own tax advice (you will have to own the stock for at least 45 days to claim the franking credits).
Functional cookies Always active
The technical storage or access is strictly necessary for the legitimate purpose of enabling the use of a specific service explicitly requested by the subscriber or user, or for the sole purpose of carrying out the transmission of a communication over an electronic communications network.
The technical storage or access is necessary for the legitimate purpose of storing preferences that are not requested by the subscriber or user.
The technical storage or access that is used exclusively for statistical purposes.The technical storage or access that is used exclusively for anonymous statistical purposes. Without a subpoena, voluntary compliance on the part of your Internet Service Provider, or additional records from a third party, information stored or retrieved for this purpose alone cannot usually be used to identify you.
The technical storage or access is required to create user profiles to send advertising, or to track the user on a website or across several websites for similar marketing purposes.