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Speaker 1: Welcome to Ask Fear and Greed, where we answer questions

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Speaker 1: about business, investing, economics, politics and more. A'm Michael Thompson

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Speaker 1: and hello Sean Ale. Hello Michael, Sean Today's question, let

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Speaker 1: me just give it to you. Why do Australian shares

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Speaker 1: pay such high dividends compared to the US?

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Speaker 2: Ah, we could compare them to China and Japan and

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Speaker 2: UK Canada pretty much the same answer, whether it's the

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Speaker 2: US or anyone else.

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Speaker 1: Okay, consistent, that's good. I like this good.

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Speaker 2: Two main reasons. One, bossie companies have always paid out

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Speaker 2: high dividends. So remember we're talking about soul Pats a

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Speaker 2: couple of weeks ago, and I think it was at

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Speaker 2: nineteen oh two, I think it listed or nine oh six,

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Speaker 2: one or the other. It has never ever it was

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Speaker 2: nine oh six now that I remember, never ever missed

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Speaker 2: the dividend payment. How's that? And since two thousand and

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Speaker 2: two it's increased in stiff and payment every year. So

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Speaker 2: that's an extreme example. But ossie companies pay out dividends,

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Speaker 2: have big banks of good dividend payers. Telstra has always

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Speaker 2: been a big dividendpire, so just historically. The second reason

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Speaker 2: much more important to be honest. Australia's system of franking

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Speaker 2: credits so to ensure earnings aren't taxed twice. We have

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Speaker 2: this franking credit system. When an Australian company pays tax

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Speaker 2: on their income, they then after that tax, they distribute dividends.

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Speaker 2: What I get as a dividend has already been taxed,

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Speaker 2: so the ATO attaches a tax credit for me on

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Speaker 2: these distributions. So another way of saying that franked dividends

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Speaker 2: have franking credits attached. When I have to pay my tax,

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Speaker 2: I've got these credits. They're offset my tax liability. So

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Speaker 2: the fact that our tax system has this in place

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Speaker 2: Australian dividends really really attractive to Australian investors. Port that

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Speaker 2: we're talking about Australian companies making their income in Australia

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Speaker 2: and you're an Australian resident. Because if you don't have

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Speaker 2: all those things, you don't necessarily get franked dividends. That's

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Speaker 2: why dividends in Australia are worth more than anywhere else.

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Speaker 2: There's a crowd called Owen Analytics. They looked at dividend yeelds,

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Speaker 2: so what you yield so for share price is one

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Speaker 2: hundred dollars and you get a dividend of five dollars

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Speaker 2: over the full year, two lots of two dollars fifty

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Speaker 2: you've got a dividend yield of five percent. Right, that's

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Speaker 2: really clear. Understand that Australia we basically have five percent

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Speaker 2: or more and have done on average over about forty years.

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Speaker 2: This is once you take the franking credits into account,

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Speaker 2: US about two percent, most European countries a bit better

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Speaker 2: than two percent, China less than two percent. We've always

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Speaker 2: just been a big dividend country.

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Speaker 1: I mean, that all makes sense, and so really just

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Speaker 1: that the historical element of it is just there is

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Speaker 1: an expectation now that companies will because we've always done it.

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Speaker 1: But more importantly is this franking credit system, because that

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Speaker 1: is what has enabled it in the first place.

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Speaker 2: Yeah, and what we should add here because we're not

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Speaker 2: an investing podcast, so make sure you go and get

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Speaker 2: financial advice before you do it. You could say, oh great,

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Speaker 2: I'm just going to buy a high dividend stock, you know,

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Speaker 2: And there's a bunch of like McPherson's a New Hope,

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Speaker 2: the coal company, Horizon Oil, Michael Hill, the Jewelers, like

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Speaker 2: they're really big, high paying dividend stocks. Then there is

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Speaker 2: like as I mentioned common Matt, the banks traditionally tellst

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Speaker 2: not as high but still what you're going to remember

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Speaker 2: that just because it pays the high dividend doesn't mean

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Speaker 2: it's a great company. So if you buy a company

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Speaker 2: and it just pays everything out in dividends and doesn't reinvest,

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Speaker 2: its actual share price might never appreciate. So getting capital

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Speaker 2: growth there, you only get the dividends. Think of it

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Speaker 2: that way. Maybe if a company issues are higher than

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Speaker 2: expected dive or a dividend that the dividend yield looks

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Speaker 2: really good, that might be because it's share price has

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Speaker 2: fallen and the company itself isn't much good because it's

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Speaker 2: you know, divid on share price. So that's your yield.

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Speaker 2: So you can't just see a high dividend stock and say, oh,

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Speaker 2: that's a great stock because I'm going to get high

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Speaker 2: dividend yields on that. You actually have to look behind

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Speaker 2: the data to see what's important.

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Speaker 1: You know what Sean what I reckon. But we have

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Speaker 1: nearly got enough ask fear and greeds to open like

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Speaker 1: an ask Fear and Greed library. Though there is just

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Speaker 1: there is so much value in some of these things,

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Speaker 1: I mean partly especially ones like this where you sound

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Speaker 1: like you know what you're talking about.

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Speaker 2: I like the fact that you say you sound like

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Speaker 2: you know what you're talking about, as opposed to you

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Speaker 2: know what you're talking about.

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Speaker 1: That's right. I mean, I obviously haven't fact checked what

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Speaker 1: you said, but you said it with such credibility that.

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Speaker 2: You know what, We should have our own separate Ask

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Speaker 2: Fear and Greed sort of playlist.

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Speaker 1: And that way, and it'll still be here in Fear

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Speaker 1: and Greed. But it means then that you can also

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Speaker 1: go and get just the full library if you just

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Speaker 1: want to learn a whole lot of stuff and appear

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Speaker 1: really really switched on, and it's all in one place.

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Speaker 1: How about us we brainstorming?

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Speaker 2: That is good? Can we do that? Could?

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Speaker 1: Yes?

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Speaker 2: Excellent?

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Speaker 1: Yes, leave it with me. I will report back soon,

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Speaker 1: but I think we might be onto something anyway. Well answered, Sean,

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Speaker 1: Thank you very much, Thank you, Michael. Remember, if you've

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Speaker 1: got your own question that you would like us to

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Speaker 1: answer and put into the growing Ask Fear and Greed library,

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Speaker 1: then please send it on through via the website Fearangreed

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Speaker 1: dot com dot au or any of the social media

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Speaker 1: platforms LinkedIn Instagram, Facebook, take your pick, send it on

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Speaker 1: through and we'll get onto it asap. I'm Michael Thompson

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Speaker 1: and this is ask Fear and Greed