With FY 2024 annual reports mostly done and dusted, Macquarie has identified 7 companies sitting on excess franking credits, piles of excess cash, and the capacity to increase their dividend yields.
Franking credits are the tax already paid by a company on its profits. When a company distributes dividends to shareholders, it can attach franking credits to show that tax has already been paid at the corporate level (usually 30%).
They're attractive for investors looking to take advantage of Australia's dividend imputation system because they offer the benefit of boosted total return, higher effective yields, and potential for special dividends or buybacks.
Here's a breakdown of the 7 companies that Macquarie believes may act on their large franking credits balance and boost dividend yields, according to the broker's latest research report.
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Downer EDI Ltd (ASX: DOW)
Macquarie analysts note there is a potential likelihood of capital return for Downer EDI in the form of Special DPS or Buyback.
The company currently has a 1% franking credit balance as a percentage of market cap and holds 19% excess cash.
Analysts also believe the company may retire its high-cost Downer EDI ROADS security division.
At time of writing, Downer EDI shares were trading at $6.12.
Flight Centre Travel Group Ltd (ASX: FLT)
Macquarie analysts note there is a potential likelihood of capital return for Flight Centre in the form of Special DPS or Buyback.
The report shows the company currently has a 3% franking credit balance as a percentage of market cap and holds 66% excess cash.
Analysts also flag the company "just announced a $200m buyback so a special could also be considered".
At time of writing, Flight Centre shares were trading at $13.67.
G8 Education Ltd (ASX: GEM)
Analysts have flagged G8 Education as having potential likelihood of capital return in the form of a Buyback.
The company currently has a 5% franking credit balance and holds 9% in excess cash as a % of market capital.
But Macquarie notes, "[A] potential buyback [is] currently in-progress. If GEM announced growth plans for its centre network a new buyback will be less likely."
At time of writing, G8 Education shares were trading at $1.28.
JB HI-FI Ltd (ASX: JBH)
JB HI-FI has a franking balance of 4% and excess cash of 1% of market capital, according to the report.
This puts the company in a position of potential for capital return in the form of Special DPS or Buyback, according to report data.
At time of writing, JB HI-FI shares were trading at $103.37.
Jumbo Interactive Ltd (ASX: JIN)
The report notes that Jumbo Interactive currently holds a 4% franking balance and 17% in excess cash.
Analysts predict this puts the company in a position of a potential for capital return in the form of a Buyback.
Analysts note that the current buyback program is ongoing, and the share price has fallen substantially in the last couple of months.
On 15 May shares were trading at $9.85, down 31.63% from January this year.
Liberty Financial Group Ltd (ASX: LFG)
Analysts list Liberty Financial as having potential for Special DPS capital return.
The company currently holds a 6% franking balance and 89% in excess cash.
Company shares, at time of writing, were trading at $3.15.
Monash IVF Group (ASX: MVF)
Monash IVF currently holds a 4% franking balance and 14% in excess cash, according to the report.
This saw analysts list the company as having potential for capital return in the form of Special DPS or Buyback.
The company commenced ordinary dividends at last result, noted scope for further capital return post supply chain investments.
Analysts see "a level of cash retained on balance sheet as prudent and will spend a portion on supply chain investment short-med term before making capital return decisions."
Monash IVF shares were trading at $0.87 on 15 May.
