Question

A non profit organisation which is exempt from income tax should invest in a company which gives fully franked dividend or a company with unfranked dividend?

Answer 1

Franked Dividend is the type of dividend where the company has paid the tax and the shareholders do not have to pay any tax on the dividend amount that they receive. Thus, this is an advantage to the shareholder.

Unfranked dividend does not provide this advantage to the shareholders. In this the shareholder have to pay the tax on the dividend that they receive from the company.

In this case, the non-profit organization is exempted from tax so they can invest in either of the two companies. It will not affect them as they will anyhow not have to pay tax on the dividend they receive. So they can decide based on the percentage of dividend and choose the company that gives the higher rate of dividend.