As a share market investor your time horizon should be one of the key determinants as to whether you chase income or take on more risk in the pursuit of growth. Income investors will generally be retirees or those approaching retirement who are seeking to build a passive income stream over the short term as they are no longer receiving a regular pay cheque every month. Australian dividend investors also get a big financial bonus if they choose shares with attached franking credits via an income tax discount when franking credits received are deducted from their final tax bill. Indeed,…
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As a share market investor your time horizon should be one of the key determinants as to whether you chase income or take on more risk in the pursuit of growth.
Income investors will generally be retirees or those approaching retirement who are seeking to build a passive income stream over the short term as they are no longer receiving a regular pay cheque every month.
Australian dividend investors also get a big financial bonus if they choose shares with attached franking credits via an income tax discount when franking credits received are deducted from their final tax bill.
Indeed, some in retirement and on a low income tax rate may even receive a cash refund in exchange for the franking credits accumulated by their fully franked dividend shares.
As such, I’ve come up with seven fully franked share picks for income seekers to consider over the years ahead. However, please note while I’m talking up the buy case below all of these businesses carry substantial risks and should only ever form part of a balanced portfolio.
Event Hospitality & Entertainment Ltd (ASX: EVT) is the cinemas and hotels business with an outstanding track record of dividend and share price growth. The hotels and property business is performing especially well and has growth potential, while the cinemas business is no growth star but should continue to deliver reliable cash flows at good profit margins. The company offers a trailing yield of 3.7% fully franked and today’s investors could expect that to grow nicely.
Flight Centre Travel Group Ltd (ASX: FLT) is the global travel business with an incredible balance sheet and track record of growth delivered by acquisitions and a well executed global expansion. After a strong share price run Flight Centre currently only offers a trailing yield of 2.5% plus full franking credits. However, this business is strong and looks well positioned to grow dividends over the long term. I’d happily add it to an income-oriented portfolio.
Dicker Data Ltd (ASX: DDR) is the IT hardware distribution business that is growing nicely thanks in part to the growth of the wider digital economy. It is founder led, with insiders and employees owning a large chunk of this company that pays out nearly all its profit in dividends. I expect it will offer a yield of at least 6% plus franking credits over the year ahead based on a share price of $2.96.
Commonwealth Bank of Australia (ASX: CBA) may be a controversial pick but for fully franked dividend seekers it’s hard to go past. The share price has fallen recently amid regulatory mishaps and the potential for slowing housing credit growth. However, I’d be comfortable picking up shares at $69.62 today based on the assumption current problems are factored into the valuation of what is still a profit making machine. The trailing yield is 6.2% plus franking credits and it should deliver reasonable total returns to investors over the long term.
Insurance Australia Group Ltd (ASX: IAG) is the Warren Buffett-backed insurer that looks the pick of the bunch in the blue-chip insurance space. IAG’s business model is relatively simple and over the long term it has delivered some reasonable dividend growth. It offers a trailing yield of 4.3% plus full franking credits based on today’s share price of $8.03.
Wesfarmers Ltd (ASX: WES) is a business I’m prepared to recommend partly on plans it has to divest its Coles supermarkets business. I would not buy a supermarket business in Australia because it looks like profit margins are only heading lower for the sector long term, but not at Bunnings which should be the core profit driver for this group going forward. As such I’d be happy to pick up part of this investment conglomerate for fully franked dividends and defensive earnings.
Washington H. Soul Pattinson & Co. Ltd (ASX: SOL) is another investment conglomerate with an impeccable track record of dividend growth. It owns chunks of a diverse portfolio of businesses including TPG Telecom Ltd (ASX: TPM), Brickworks Limited (ASX: BKW) and Australian Pharmaceutical Industries. Its diversification and experienced management team appear major positives for investors with a trailing yield of 2.8% plus franking credits likely to grow over the long term.
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The Motley Fool Australia owns shares of and has recommended Dicker Data Limited, Event Hospitality & Entertainment, Flight Centre Travel Group Limited, Washington H. Soul Pattinson and Company Limited, and Wesfarmers Limited. The Motley Fool Australia owns shares of Insurance Australia Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.