June 16, 2025 • 6 mins
Join Sean Aylmer & Michael Thompson as they answer questions on business, investing, economics, politics and more.
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Episode Transcript
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Speaker 1 (00:03):
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. A'm Michael Thompson
and hello Sean Ale. Hello Michael, Sean Today's question, let
me just give it to you. Why do Australian shares
pay such high dividends compared to the US?
Speaker 2 (00:24):
Ah, we could compare them to China and Japan and
UK Canada pretty much the same answer, whether it's the
US or anyone else.
Speaker 1 (00:32):
Okay, consistent, that's good. I like this good.
Speaker 2 (00:35):
Two main reasons. One, bossie companies have always paid out
high dividends. So remember we're talking about soul Pats a
couple of weeks ago, and I think it was at
nineteen oh two, I think it listed or nine oh six,
one or the other. It has never ever it was
nine oh six now that I remember, never ever missed
the dividend payment. How's that? And since two thousand and
(00:58):
two it's increased in stiff and payment every year. So
that's an extreme example. But ossie companies pay out dividends,
have big banks of good dividend payers. Telstra has always
been a big dividendpire, so just historically. The second reason
much more important to be honest. Australia's system of franking
credits so to ensure earnings aren't taxed twice. We have
(01:24):
this franking credit system. When an Australian company pays tax
on their income, they then after that tax, they distribute dividends.
What I get as a dividend has already been taxed,
so the ATO attaches a tax credit for me on
these distributions. So another way of saying that franked dividends
(01:46):
have franking credits attached. When I have to pay my tax,
I've got these credits. They're offset my tax liability. So
the fact that our tax system has this in place
Australian dividends really really attractive to Australian investors. Port that
(02:06):
we're talking about Australian companies making their income in Australia
and you're an Australian resident. Because if you don't have
all those things, you don't necessarily get franked dividends. That's
why dividends in Australia are worth more than anywhere else.
There's a crowd called Owen Analytics. They looked at dividend yeelds,
so what you yield so for share price is one
(02:31):
hundred dollars and you get a dividend of five dollars
over the full year, two lots of two dollars fifty
you've got a dividend yield of five percent. Right, that's
really clear. Understand that Australia we basically have five percent
or more and have done on average over about forty years.
This is once you take the franking credits into account,
(02:52):
US about two percent, most European countries a bit better
than two percent, China less than two percent. We've always
just been a big dividend country.
Speaker 1 (03:07):
I mean, that all makes sense, and so really just
that the historical element of it is just there is
an expectation now that companies will because we've always done it.
But more importantly is this franking credit system, because that
is what has enabled it in the first place.
Speaker 2 (03:21):
Yeah, and what we should add here because we're not
an investing podcast, so make sure you go and get
financial advice before you do it. You could say, oh great,
I'm just going to buy a high dividend stock, you know,
And there's a bunch of like McPherson's a New Hope,
the coal company, Horizon Oil, Michael Hill, the Jewelers, like
they're really big, high paying dividend stocks. Then there is
like as I mentioned common Matt, the banks traditionally tellst
(03:43):
not as high but still what you're going to remember
that just because it pays the high dividend doesn't mean
it's a great company. So if you buy a company
and it just pays everything out in dividends and doesn't reinvest,
its actual share price might never appreciate. So getting capital
growth there, you only get the dividends. Think of it
that way. Maybe if a company issues are higher than
(04:07):
expected dive or a dividend that the dividend yield looks
really good, that might be because it's share price has
fallen and the company itself isn't much good because it's
you know, divid on share price. So that's your yield.
So you can't just see a high dividend stock and say, oh,
that's a great stock because I'm going to get high
dividend yields on that. You actually have to look behind
(04:29):
the data to see what's important.
Speaker 1 (04:32):
You know what Sean what I reckon. But we have
nearly got enough ask fear and greeds to open like
an ask Fear and Greed library. Though there is just
there is so much value in some of these things,
I mean partly especially ones like this where you sound
like you know what you're talking about.
Speaker 2 (04:53):
I like the fact that you say you sound like
you know what you're talking about, as opposed to you
know what you're talking about.
Speaker 1 (04:58):
That's right. I mean, I obviously haven't fact checked what
you said, but you said it with such credibility that.
Speaker 2 (05:03):
You know what, We should have our own separate Ask
Fear and Greed sort of playlist.
Speaker 1 (05:11):
And that way, and it'll still be here in Fear
and Greed. But it means then that you can also
go and get just the full library if you just
want to learn a whole lot of stuff and appear
really really switched on, and it's all in one place.
How about us we brainstorming?
Speaker 2 (05:28):
That is good? Can we do that? Could?
Speaker 1 (05:31):
Yes?
Speaker 2 (05:31):
Excellent?
Speaker 1 (05:32):
Yes, leave it with me. I will report back soon,
but I think we might be onto something anyway. Well answered, Sean,
Thank you very much, Thank you, Michael. Remember, if you've
got your own question that you would like us to
answer and put into the growing Ask Fear and Greed library,
then please send it on through via the website Fearangreed
dot com dot au or any of the social media
platforms LinkedIn Instagram, Facebook, take your pick, send it on
(05:53):
through and we'll get onto it asap. I'm Michael Thompson
and this is ask Fear and Greed
Welcome to Ask Fear and Greed, where we answer questions
about business, investing, economics, politics and more. A'm Michael Thompson
and hello Sean Ale. Hello Michael, Sean Today's question, let
me just give it to you. Why do Australian shares
pay such high dividends compared to the US?
Speaker 2 (00:24):
Ah, we could compare them to China and Japan and
UK Canada pretty much the same answer, whether it's the
US or anyone else.
Speaker 1 (00:32):
Okay, consistent, that's good. I like this good.
Speaker 2 (00:35):
Two main reasons. One, bossie companies have always paid out
high dividends. So remember we're talking about soul Pats a
couple of weeks ago, and I think it was at
nineteen oh two, I think it listed or nine oh six,
one or the other. It has never ever it was
nine oh six now that I remember, never ever missed
the dividend payment. How's that? And since two thousand and
(00:58):
two it's increased in stiff and payment every year. So
that's an extreme example. But ossie companies pay out dividends,
have big banks of good dividend payers. Telstra has always
been a big dividendpire, so just historically. The second reason
much more important to be honest. Australia's system of franking
credits so to ensure earnings aren't taxed twice. We have
(01:24):
this franking credit system. When an Australian company pays tax
on their income, they then after that tax, they distribute dividends.
What I get as a dividend has already been taxed,
so the ATO attaches a tax credit for me on
these distributions. So another way of saying that franked dividends
(01:46):
have franking credits attached. When I have to pay my tax,
I've got these credits. They're offset my tax liability. So
the fact that our tax system has this in place
Australian dividends really really attractive to Australian investors. Port that
(02:06):
we're talking about Australian companies making their income in Australia
and you're an Australian resident. Because if you don't have
all those things, you don't necessarily get franked dividends. That's
why dividends in Australia are worth more than anywhere else.
There's a crowd called Owen Analytics. They looked at dividend yeelds,
so what you yield so for share price is one
(02:31):
hundred dollars and you get a dividend of five dollars
over the full year, two lots of two dollars fifty
you've got a dividend yield of five percent. Right, that's
really clear. Understand that Australia we basically have five percent
or more and have done on average over about forty years.
This is once you take the franking credits into account,
(02:52):
US about two percent, most European countries a bit better
than two percent, China less than two percent. We've always
just been a big dividend country.
Speaker 1 (03:07):
I mean, that all makes sense, and so really just
that the historical element of it is just there is
an expectation now that companies will because we've always done it.
But more importantly is this franking credit system, because that
is what has enabled it in the first place.
Speaker 2 (03:21):
Yeah, and what we should add here because we're not
an investing podcast, so make sure you go and get
financial advice before you do it. You could say, oh great,
I'm just going to buy a high dividend stock, you know,
And there's a bunch of like McPherson's a New Hope,
the coal company, Horizon Oil, Michael Hill, the Jewelers, like
they're really big, high paying dividend stocks. Then there is
like as I mentioned common Matt, the banks traditionally tellst
(03:43):
not as high but still what you're going to remember
that just because it pays the high dividend doesn't mean
it's a great company. So if you buy a company
and it just pays everything out in dividends and doesn't reinvest,
its actual share price might never appreciate. So getting capital
growth there, you only get the dividends. Think of it
that way. Maybe if a company issues are higher than
(04:07):
expected dive or a dividend that the dividend yield looks
really good, that might be because it's share price has
fallen and the company itself isn't much good because it's
you know, divid on share price. So that's your yield.
So you can't just see a high dividend stock and say, oh,
that's a great stock because I'm going to get high
dividend yields on that. You actually have to look behind
(04:29):
the data to see what's important.
Speaker 1 (04:32):
You know what Sean what I reckon. But we have
nearly got enough ask fear and greeds to open like
an ask Fear and Greed library. Though there is just
there is so much value in some of these things,
I mean partly especially ones like this where you sound
like you know what you're talking about.
Speaker 2 (04:53):
I like the fact that you say you sound like
you know what you're talking about, as opposed to you
know what you're talking about.
Speaker 1 (04:58):
That's right. I mean, I obviously haven't fact checked what
you said, but you said it with such credibility that.
Speaker 2 (05:03):
You know what, We should have our own separate Ask
Fear and Greed sort of playlist.
Speaker 1 (05:11):
And that way, and it'll still be here in Fear
and Greed. But it means then that you can also
go and get just the full library if you just
want to learn a whole lot of stuff and appear
really really switched on, and it's all in one place.
How about us we brainstorming?
Speaker 2 (05:28):
That is good? Can we do that? Could?
Speaker 1 (05:31):
Yes?
Speaker 2 (05:31):
Excellent?
Speaker 1 (05:32):
Yes, leave it with me. I will report back soon,
but I think we might be onto something anyway. Well answered, Sean,
Thank you very much, Thank you, Michael. Remember, if you've
got your own question that you would like us to
answer and put into the growing Ask Fear and Greed library,
then please send it on through via the website Fearangreed
dot com dot au or any of the social media
platforms LinkedIn Instagram, Facebook, take your pick, send it on
(05:53):
through and we'll get onto it asap. I'm Michael Thompson
and this is ask Fear and Greed
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