With interest rates at record lows, the importance of income from shares has never been more pressing. With bonds, term deposits and savings accounts all yielding a real return of next to zero, investors have been forced to turn to shares and property for any kind of meaningful yield.
However, spare a thought for those beyond our shores. The Australian tax system is unrivalled in the developed world for its generous treatment of dividend income. You won’t find debates about abolishing franking credits in the United Kingdom, United States, or Germany because they were either abolished decades ago, or simply never existed.
So let’s celebrate a good fully franked dividend with these 3 ASX shares. All have healthy dividend yields that come with full franking credits attached.
Telstra Corporation Ltd (ASX: TLS)
Telstra has pleased investors this year, with the share price up close to 40% YTD. This still leaves Telstra with a solid 3.86% dividend yield, which goes up to 5.5% if you include franking. Telstra has proven that it continues to possesses fantastic brand durability, with a roughly 50% share in the mobile and fixed-line telco markets. Its investment in a Telstra 5G network is also promising, as 5G is poised to become the ‘next big thing’ in the telecommunications sector.
Wesfarmers Ltd (ASX: WES)
I like Wesfarmers purely because of the diverse portfolio of quality businesses that fall under its stable. Not only does Wesfarmers own the wildly successful Bunnings Warehouse business, but the company also boasts Kmart, Target, Kleenheat Gas, Pacific Brands and WesCEF (Chemicals, Energy and Fertiliser) among many others. The company also retains a 15% stake in the recently spun-off Coles Group Ltd (ASX: COL). Wesfarmers is expected to yield a 4.95% dividend (7.07% grossed-up) going forward, not including the special dividend paid from the Coles demerger.
Commonwealth Bank of Australia (ASX: CBA)
Commonwealth Bank is our biggest listed public company, and so you would expect nothing less than its juicy 5.34% yield (7.63% with franking). Commonwealth Bank remains a solid business with a strong brand and commanding pricing power in the financial market. Its payout ratio is not as high as some of its ‘Big Four’ cousins and so I am reasonably happy with CommBank’s dividend potential going forward.
All of these companies have proven to be quality businesses with strong income potential and full franking credits. I like Wesfarmers the most based on current prices, but CommBank isn’t looking too expensive either.
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Motley Fool contributor Sebastian Bowen owns shares of Telstra Limited. The Motley Fool Australia owns shares of and has recommended Telstra Limited and Wesfarmers 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.