Diversity and franking credits

One way to spread your risk and to diversify your investment portfolio might be to invest in both BHP and Woolworths shares.

If you look in the shares section of a newspaper or financial paper they will often list the price, dividend yield, the franking credit and possibly the P/E Ratio, as well as other indicators. Alternatively, this information is also available online – such as www.asx.com.au.

Dividends from Australian shares may also have a franking credit. A franking credit represents tax already paid by the company on your dividends and can affect the after-tax return to you.

The credit may also be called an imputation credit. How franking credits affect the tax payable by a shareholder is explained in the Tax and Structures module.

You can purchase shares in publicly listed companies (which are traded on a stock exchange) or a private company. You can invest in shares both locally and internationally.