Question

The Commonwealth Bank of Australia (CBA) recently announced a “cash net profit from continuing operations for the 2020 Financial Year of $7.3 billion”. What is Commonwealth’s dividend policy, and what was the total dividend paid to shareholders in 2019/20? https://www.commbank.com.au/about-us/investors/dividend-information.html

Answer 1

CBA pays half-yearly dividend in February and the final dividend in September

In February 2020 they paid a dividend of $2 and in September a sum of $.98 . Total dividend for the year is $ 2.98 for 2020.

Dividend Policy of CBA

Commonwealth Bank of Australia will seek to:

• pay cash dividends at strong and sustainable levels;
• target a full-year payout ratio of 70% - 80%; and
• maximise the use of its franking account by paying fully franked dividend.

A franked distribution is an arrangement in Australia that eliminates the double taxation of dividends. The shareholder can reduce the tax paid on the dividend by an amount equal to the tax imputation credits.

Franked dividends have a franking credit attached to them which represents the amount of tax the company has already paid. Franking credits are also known as imputation credits.

Generally, Australian resident shareholders are entitled to receive a credit for any tax the company has paid. If your top tax rate is less than the company's tax rate, the Australian Tax Office will refund you the difference.

The company ensures that it pays 70% to 80% of what it ears in a year to the shareholders.