After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.


It always amazes me how fully franked dividends are handled by the market.

This week, Woodside Energy (ASX:WDS) went ex-div, lobbing shareholders a US$1.44 per share dividend payment.

If you gross this final dividend for the year up to include the franking credits, a back-of-the-envelope calculation on a 100% fully franked dividend at a 30% tax rate goes like this: US$1.44 X 130% = US$1.82.

So, Woodside Energy paid 30% tax on their profits – or said they did, at least – last year, so this tax payment/credit is included in their dividends.

That’s because when he was treasurer in 1987, Paul Keating – the man who gave us “the recession we had to have” – figured that if shareholders had to pay tax on a company’s dividend payment, then that was money that was taxed twice.

Not a fan of (financial) double-dipping, Keating pushed through the changes to tax laws, and that’s why Australians have this system in place.


‘Howzat for a bargain?’

Now, back to Woodside Energy, which used to be called Woodside Petroleum before the woke crowd came along, and “petroleum” turned into a dirty word.

With 1.89bn shares on issue, the dividend payout from Woodside is over US$2.72bn, which means that on a tax rate of 30%, they had already paid the tax man a tidy US$816m.

It has 649,000 shareholders holding those 1.89bn shares, and that equates to a lot of voters who became, and remain, very happy that their fully franked dividends are effectively (for them) tax-free – and that US$816m is what makes up the franking credits. 

If the shares are held in your superannuation fund, which every working Australian is legally required to have and which is taxed at say 15% (for now…), then at the end of the year, you claim back an extra 15% on the dividend, which in this case would be ~US$16c.

Not a bad result for all these baby boomers, who have paid off their mortgage and retired with a juicy $3m+ self managed super fund (SMSF).

This tax concession only applies to Australian holders and according to Woodside’s last 208-page annual report, 99.3% of their shares are registered here.

The annual report also states that the company made US$6.49bn on sales of US$16.8bn. That’s a margin of 38% which is very impressive, and a rate that even Warren Buffet would blush at.

This week, on 08 March, Woodside Energy went ex-dividend and even though no one knows what the exact exchange rate to the Aussie Dollar is going to be, the shares fell from their closing price of $37.62 to a low of $34.74.

Woodside went ex-div and shed $2.88 a share. Chart via Marketech.

That is a difference of $2.88 a share and this is the bit that always gets me: Nothing about the company itself has changed. It is exactly the same company, making exactly the same profits, yet it falls 7.65%.

Howzat for a bargain? 

On a day when the market held steady, these babies are marked down and are now valuing the company at  $65.5bn instead of $71bn.

In one day, their valuation falls by $5.5bn, despite the fact that we don’t know what the exact dividend AUD exchange rate will be until 14 March.

A 38% taxable profit margin on US$16.8bn of sales and the company’s valuation falls 7.65% in one sunny ex-dividend day.

By the way, if you are shorting Woodside Energy, you have to pay the person you have borrowed the shares from, the cash equivalent of the dividend plus the equivalent 30% franking credits.

This means that the lender then has to treat the cash equivalent payment as income and therefore has to pay tax on the whole payment and cannot claim back any franking credits.


Think before you spray

The point of all this talk about Woodside and dividends and taxes and superannuation brings to mind a protest a couple of months ago, when environmental activists gave Woodside a huge slab of free advertising by spray painting the company logo on Frederick McCubbin’s famous painting Down on his Luck.

It had a protective perspex shield in front of it, but really it’s the thought that counts, right?

One of the activists then superglued herself to the wall of the gallery, which made the local copper’s job of catching the culprit very easy.

Here’s the thing. These “woke” protesters have, at some point, had jobs and by law would have a superannuation account, growing along with the rest of the economy. 

And presumably they also have parents who are either retired or getting close to that age, and will be relying on that superannuation to fund their retirement, or draw a pension.

Those are accounts that are growing, quite a lot in some cases, through the profits and dividends (and tax payments to the government) of companies just like Woodside.

But the irony of living in a country where it’s okay to deface an iconic work of art, safe in the knowledge that when they or their parents retire, they will have money to live on generated by the very same company that they are “protesting” seems to have escaped them. 

There are better ways to protest than spray painting a logo over a work of art, and maybe these woke protesters need a bit of a wake-up call. 


The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].

Feel free to contact him with your best stock tips and ideas.