Franking describes tax credits and the system is called dividend imputation. Companies get franking credits to distribute when they pay tax in Australia. Most companies that do not have franking credits have a substantial part of its revenue derived from outside of Australia. Given the proposed changes to the cash refund of imputation credits, here are 4 companies that offer an attractive yield with no, or reduced, franking credits.
1. Amcor (AMC)
Amcor is a global packaging company and the packaging business is all about scale. Its recent merger with Bermis will be company changing. The New Amcor will have a market cap of $17 billion, making it one of the largest paper and packaging producers. The market cap will mean that it should be included in the S&P 500 index. There is potential upside if synergies from the merger are greater than expected. There’s also an opportunity to boost sales, given different product portfolios and geographic footprints. Shareholder vote on the merger is scheduled for 2 May with expected completion 15 May.
2. Spark Infrastructure Group (SKI)
Expected dividend yield: 6.8%
SKI holds an interest in three electricity distribution assets in South Australia & Victoria: Victoria Power, SA Power and Transgrid. It is considered a bond proxy so a fall in interest rates is positive for the share price.
3. Macquarie Group (MQG)
Expected dividend yield: 4.8%
While the domestically-focused banks are struggling to find profit growth, Macquarie has indicated that growth should be 15% for the company. The company has a track record in being about to move quickly to take advantage of market conditions. The company has a strong balance sheet and should continue to find growth opportunities despite softening conditions domestically.
4. Boral (BLD)
Expected dividend yield: 5.7%
Boral is a building products company with large trading exposure to Australia, US and Asia. It is a cyclical business and is dealing with a residential housing slow down in Australia. While the company issued a profit warning earlier in the year, expectations are for a rebound in the 2nd half of the financial year. The company blamed weaker results on the weather, especially in the US. While the dividend is attractive, the company could see an uplift in share price if the rebound in the 2nd half occurs and as confidence in management is restored.
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