Dividends are the share market’s way of paying you for owning a piece of a business. When a company makes a profit, its board can choose to keep the money to grow the business, return some of it to shareholders, or both. The portion paid out to shareholders is the dividend – usually a set number of cents per share, landing in your bank account a few weeks after it is announced.
How and when dividends are paid
Most Australian companies that pay dividends do so twice a year: an interim dividend after the half-year result and a final dividend after the full-year result. Some also pay one-off special dividends when there is surplus capital to return.
Four dates matter for every dividend:
- Announcement date – the company declares the dividend amount and timetable, usually alongside its results.
- Ex-dividend date – the cut-off. You must own the shares before this date to receive the dividend; buy on or after it and the payment goes to the previous owner.
- Record date – the day the share registry takes its snapshot of who is entitled to be paid, one business day after the ex-dividend date.
- Payment date – when the money is actually paid, typically a few weeks later.
Payment goes to the bank account registered against your holding with the company’s share registry. If your details are out of date, the money does not disappear – it sits unclaimed, which is exactly what our guide to finding lost shares and unclaimed dividends covers.
Franked, unfranked and everything in between
Australia’s dividend system has a feature most countries lack: franking credits. Because the company has already paid company tax on its profits, dividends paid from those profits can carry a credit for the tax already paid, so the same profit is not taxed twice. A fully franked dividend carries the maximum credit, a partially franked dividend carries some, and an unfranked dividend carries none. What franking is worth in your hands depends on your own tax position, so it is one to discuss with your accountant or adviser – and regular franked dividends are one reason Australian shares feature so heavily in retirement portfolios, covered in our guide to planning for retirement. For the full story, see our explainer on franking credits, explained simply.
Do all shares pay dividends?
No. Paying a dividend is a choice, not an obligation. Established, profitable companies – banks, miners in strong years, supermarkets, insurers – tend to pay regular dividends. Companies reinvesting everything into growth often pay little or nothing, on the logic that shareholders are better served by the reinvestment. Neither approach is automatically better; they are simply different ways a company can use its profits.
Cash or more shares: dividend reinvestment plans
Many companies offer a dividend reinvestment plan (DRP), which lets you take your dividend as additional shares instead of cash, sometimes at a small discount to the market price and without brokerage. Participation is optional and managed through the company’s share registry.
Keeping track of your dividends
Every dividend comes with a statement from the share registry showing the amount, the franking level and the payment details – worth keeping for tax time. If statements have stopped arriving, or you suspect old holdings are still paying dividends you never see, the registry’s records can be brought up to date, and unclaimed amounts can usually be traced. Our team handles this regularly – see the lost shares and unclaimed dividends guide, or get in touch.
The information in this article is general information only and does not take into account your objectives, financial situation or needs. You should consider whether it is appropriate for your circumstances, and your own tax position, before acting on it. iInvest Trading & Advisory is a Corporate Authorised Representative (CAR 431611) of Zodiac Securities Pty Ltd (AFSL 398350).
