The total annual dividend will amount to R5.50, and divided by the share price of R100 it will result in a 5.5% dividend yield. Hopefully there will also be an increase in your share price. In conclusion, bear in mind that the vehicle (company, trust, personal capacity, etc) you use determines how you will be taxed and should always be considered with tax planning. While this article has steered clear of becoming too technical and has not included all factors, it will hopefully emphasise the importance of proper tax planning. Remember too, that the share price is theoretically supposed to fall with the amount paid out as dividends on a particular day, as it is the distribution of a company's profits to its shareholders.
#15Share Code: Fortress Income FD Ltd A FFA DY: 7.889393939 #14Share Code: 15 Dividends #8 Share Code: Redefine Prop Int Ltd RIN DY: 9.087431776
Beatthemarket.co.za | March 2012 ANET 15 #9Share Code: Fairvest Property Hldgs FVT DY: 9.083333333 page 17 Isa Holdings Ltd ISA DY: 7.956090909 #13Share Code: Vukile Property Fund Ltd VKE DY: 7.973342088 #12Share Code: #11Share Code: #10Share Code: Cadiz Holdings Ltd DY: 8.000000000 Redefine Properties Ltd RDF DY: 8.187322465 Kumba Iron Ore Ltd KIO DY: 8.261682243 CDZ
Case Study Entity:
Amount received:
Trust R1,000,000 Amount taxed 40%
Company/Closed corporation R1,000,000
28%
Personal capacity (Salary) Dividends received R1,000,000
R1,000,000 Net Income R600,000 R720,000
Based on a sliding scale. However, on this amount you will be in highest income bracket (over R617, 000 p/a). Therefore, you will be taxed at a rate of 40%. if you are under 65 years of age you will have a R11440 exemption for the 2013 tax period R705,040
10% - only valid until 1 April 2012
R900,000
This case study illustrates how you would be taxed if you were to receive R1, 000,000 in four different scenarios.
From this case study it is clear that it is preferable to receive income as dividends. A high dividend share as Vodacom would tend to trade stronger than other stocks due to the fact that it attracts large funds.
BTM recommends that investors should re-invest dividends as it improves their compound growth on investment. For example, pension funds opt for shares with high dividend yields as they provide an extra source of revenue from owning the share and can assist with their cash flow when paying out pensioners.
Please note that some of the companies listed here have been suspended from trading on the JSE.
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