Glossary

45 Day Rule

The 45 day holding period rule requires investors to hold their shares “at risk” for a minimum of 45 days to receive the benefits of franking credits. The 45 days at risk does not include the purchase date or sale date. The 45 day holding period rule does not apply where an investors total franking credits is below $5,000 for a financial year.

Preference shares have a holding period rule of 90 days at risk (not including purchase date or sale date) to receive the benefits of franking credits.

Alpha

A measure of investment performance on a risk-adjusted basis. Alpha takes the volatility of a share, portfolio or fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund’s alpha.

Books Close Date

When a company declares a dividend, generally at the same time as its biannual trading results announcement, it also announces a record date (sometimes also known as the books closing date). Dividends are paid to all investors listed on the company’s share register at 5:00pm on this record date. Changes to registration details also need to be made by this time. – See more at: http://www.dividends.com.au/explanation-of-dividend-dates/#sthash.PPffJlKT.dpuf

Dividend

A distribution of a portion of a company’s earnings, decided by the board of directors, to its shareholders. The dividend is most often quoted in terms of the dollar amount each share receives (dividends per share). It can also be quoted in terms of a percent of the current market price, referred to as dividend yield.

Dividend Cover

The ratio of company’s earnings over the dividend paid to shareholders, calculated as earnings per share divided by the dividend per share.

Dividend Reinvestment Scheme

Dividend Reinvestment Plans allow shareholders to take part or all of their dividend in the form of additional shares rather than cash, with no transaction or brokerage costs.

Dividend Stripping

The trading practice of buying of shares ahead of the ex-dividend date and sell after the ex-date to benefit from the combination of a possible run-up in prices and from the dividend and franking credits.

Earnings Per Share

The portion of a company’s profit allocated to each outstanding share. Earnings per share is an indicator of a company’s profitability.

Ex Dividend Date

The date on or after which a stock trades ex-dividend. At this point, the person who owns the security on the ex-dividend date will be awarded the payment, regardless of who currently holds the stock. After the ex-date has been declared, the stock will usually drop in price by the amount of the expected dividend.

Franking Credit

Franking Credits also known as Imputation Credits are a type of tax credit that allows Australian Companies to pass on tax paid at the company level to shareholders. The benefits are these franking credits can be used to reduce income tax paid on dividends or potentially be received as a tax refund.

Franked Dividend

A dividend paid that is entirely or partly franked, which is entitled to a franking credit.

Imputation Credit

See Franking Credit.

Payment Date

Most Australian companies pay dividends between two and eight weeks after the ex-dividend date. This varies and some companies are noteworthy for being consistently slow It is worth checking the payable date as some companies are serial offenders when it come to late payment of dividends. The company posts out the dividend cheques on the payable date Alternatively, if you have requested a direct credit, the day the funds will be transferred to you. Investors who participate in a dividend reinvestment plan (DRP) will receive shares in lieu of cash around this date. – See more at: http://www.dividends.com.au/explanation-of-dividend-dates/#sthash.PPffJlKT.dpuf

Payout Ratio

The amount of earnings paid out in dividends to shareholders. The payout ratio also indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend because smaller dividends are easier to pay out than larger dividends.

Record Date

See Books Close Date.

Unfranked Dividend

A dividend with no entitlement to franking credits. The company paying the dividend has not paid Australian tax on the earnings that being distributed as dividends.

Disclaimer
The information provided on this website is for use of a general nature only and is not intended to be relied upon as, nor to be a substitute for, specific professional or investment advice. The team at Dividends.com.au are not lawyers, financial planners, investment advisers, or accountants. So, before taking any action or risking any money, you should always check with your own qualified professional advisers.