It’s around this time of year that people can start filing their tax returns with the ATO and hopefully getting tax refunds. If investors get some money back, I think that there are some interesting ASX shares to consider.
How can someone ‘beat the tax man’? I’m not suggesting having a boxing match, or having a table tennis match. There are some ASX shares that attach franking credits to their dividends, which are really tax efficient for investors and reduces the amount of tax owed to the ATO (or increases the refund).
I wouldn’t buy something just because of franking credits, but it can certainly add to an investor’s after-tax returns. But, I do think these three are solid ASX share options:
Future Generation Investment Company Ltd (ASX: FGX)
This is a listed investment company (LIC). The job of a LIC is to invest in different shares or assets of behalf of the LIC’s shareholders.
Normally, the fund manager of the LIC will charge a management fee. But, there are no investment fees with this LIC. It is invested in a range of different fund managers’ funds where none of them charge a management fee or performance fee. That’s because 1% of the net assets each year can be donated to youth-focused charities instead. That’s where the ‘Future Generation’ part of the name comes in.
These fund managers invest in a range of smaller ASX shares and larger ones. The Future Generation portfolio has outperformed the S&P/ASX All Ordinaries Accumulation Index over the last three years, five years and since it started in September 2014.
It has been steadily growing its dividend since 2013 and currently offers a dividend yield of 7.1% including the franking credits.
Washington H. Soul Pattinson and Co. Ltd (ASX: SOL)
WHSP is an old investment house business that has been going for over a century.
It started as just a pharmacy business, but now it’s invested across a wide array of industries and ASX shares including building products, property, telecommunications, resources, financial businesses and so on.
This business has been steadily growing its dividend since 2000, which means the franking credits have also been steadily growing.
I think this could be one of the most defensive ASX shares because of its diversified portfolio, defensive assets and good cashflow.
Including franking credits, it has a 3.6% yield.
Metcash Limited (ASX: MTS)
Metcash is a pretty diverse business as well. It supplies a wide array of independent alcohol retailers, like Cellarbrations, The Bottle-O, IGA Liquor, Duncans and Thirsty Camel. It also supplies supermarkets IGA and Foodland.
It also has a hardware business segment which includes Mitre 10, Home Timer & Hardware and Total Tools.
The ASX share has committed to a relatively high dividend payout ratio of its net profit each year.
Looking at the last 12 months of dividends, its dividend yield amounts to 7.4%.
I think all three of these ASX shares have attractive futures. The strong dividend income is also very attractive, which comes with good franking credits.