In 2012, 52% of Self-Managed Superannuation Funds (SMSF) held shares in companies listed on the ASX.
By comparison, directly or indirectly, just 38% of the Australian population held ASX shares in 2012.
Whilst 52% of all SMSFs might sound like a big number, given the benefits of sharemarket investing, personally I was a little surprised to see just over half hold ASX shares.
One such benefit for SMSF investors comes from the Australian Tax Office, or ATO, in the form of franking credits.
The formula is actually quite simple.
Since Australians are taxed at a rate of 15% within their super accounts, and many Australian companies pay dividends which come with a 30% tax credit (an incentive known as franking), SMSF investors actually receive a 15% tax windfall every year at June 30.
Hypothetically, if your company pays a 5% fully franked dividend, your actual return (after tax) would be more like 5.75%. Talk about easy money.
3 stocks with big dividends
Three stocks renowned for paying reliable dividends are Woolworths Limited (ASX: WOW), Coca-Cola Amatil Ltd (ASX: CCL) and National Australia Bank Ltd (ASX: NAB).
Let's take a quick look at each to see if any of these stocks are right for your SMSF share portfolio…
Woolworths
Despite being Australia's most profitable supermarket chain, investors have grown increasingly bearish on Woolworths shares over the past 12 months. This has come about as a result of increased concerns over competition from its key rival, Coles, and international peers, Costco and Aldi. However, the selloff has pushed Woolies shares into a much more compelling valuation range. Moreover, at today's prices they come loaded with a 4.96% fully franked dividend yield.
National Australia Bank
Based on its current price of $34.28, NAB has the largest fully franked dividend yield (5.78%) of the Big Four banks. However, there are reasons to believe that NAB's dividend may not grow as quickly as that of its peers.
Following years of share price underperformance, NAB recently decided to divest its UK subsidiary, Clydesdale Bank. Whilst this could be a catalyst for a turnaround in the bank's fortunes, the strategy will likely cost billions of dollars. What's more, when coupled with the possibility of increased regulatory oversight, NAB's ability to pay a rising dividend stream may be called into question.
Coca-Cola Amatil
Shares in Coca-Cola Amatil are different from the two aforementioned companies because they offer only partially franked dividend yields. Indeed, fully franked dividends are common to companies which pay all their taxes in Australia. However, if a company, such as a Coca-Cola Amatil, earns part of its income overseas, it's common for them to offer only partially franked dividends.
Following a significant selloff in the company's shares last year, Coca-Cola Amatil currently offers a 4.16% dividend yield. Coupled with an expected return to profit growth in the near-term, Coca-Cola Amatil looks a good buy today.
Buy, Hold or Sell?
