National Australia Bank Ltd. (ASX: NAB) shares, Telstra Corporation Ltd (ASX: TLS) shares and BHP Billiton Limited (ASX: BHP) shares offer juicy fully franked dividends.
Franking credits galore
NAB, Telstra and BHP shares offer franking credits with their dividend payments. Franking credits can be thought of as a form of 'tax credit' which is paid by the company directly to the Australian Tax Office (ATO). When you lodge your yearly tax return with the ATO, the credits can be used to reduce your tax bill.
Ultimately, Australian shareholders in companies which pay franking credits can boost their after-tax income. It's a neat feature of Australia's tax system and arguably one of the best ways to 'beat the taxman' each year.
NAB
National Australia Bank is Australia's fourth largest bank, worth $84 billion. NAB is known for its business banking, which forms the core of its long-term strategy alongside retail banking.
At today's prices, NAB shares are forecast to pay a dividend equivalent to 6.6% fully franked. With full franking credits, that's a dividend yield of over 9% after the tax credits are included.
Telstra
Thanks to a falling share price, Telstra shares are being forecast by analysts to offer an even larger payment to shareholders: 7.2% fully franked. Australia's leading telecommunications company has had a tough time convincing investors that it can grow its profits over coming years, with the ongoing rollout of the NBN and increasing competition in mobiles.
BHP
BHP is Australia's second-largest company, behind Commonwealth Bank of Australia (ASX: CBA). BHP shares yield a dividend of 3.2% fully franked, which is lower than that of NAB and Telstra. Recently, following the collapse of iron ore, oil, copper and coal prices, BHP was forced to cut its dividend to shore up its balance sheet.
However, with the markets for BHP's commodities turning upwards, it appears investors are once again looking to shares in 'the big Australian' for dividend income.
Foolish Takeaway
Franking credits are a great way to earn a tax-effective income stream.
However, while NAB, Telstra and BHP shares pay big dividends and are on my investing watchlist they are not a buy at today's prices in my opinion. I'm waiting for lower prices before buying shares in these blue chips.
