Whilst I don’t label my investing style as one that specifically targets dividends, I have noticed that SMSF investors in particular often embrace such a style. What I do sometimes blog about though is certain “special situations” or “hidden value” that lurks underneath the surface. I thought therefore I would discuss a few situations I have noticed recently that combine such strategies.

Sunland Group Limited (ASX:SDG)             

The full year results SDG reported NTA of $2.34 a share. They are a residential property developer who a bit over 12 months ago announced a plan to wind up. Adjusted for the cash dividend paid out last month that NTA could be adjusted to $2.14. First week after the last ex-date the shares mostly traded in the 2.55-2.60 range. The shares in the last fortnight then traded quite a bit of volume around the $2.40 mark which prompted me to just check on some of the numbers. That equates to a market cap of about $330 million.

At June 30 FY21 there was about $74 million of franking credits in the accounts which already allows for that last dividend.

For the rest of the wind-up phase (perhaps steadily done in stages over the next 2 years), the existing franking credits I just mentioned then now could underpin fully franked dividends of $1.27 a share. However this $1.27 could end up being more by the end of the wind up process after they eventually pay more tax.

Recent sales in the wind-up process suggest that the real NTA might be higher than what is on the books. Given their exposure is still geared, what if we were talking about $2.85 NTA a share instead of $2.14 I discussed earlier? If that is on the mark, with the remaining wind-up there would be further tax payable (although the annual report does note $23 million of losses they can utilize). Still, that NTA I just mentioned could come back to more like the $2.68 mark after taking some further tax out.

Yet this could result in further franking credits, perhaps around $1.66 of the $2.68 can be distributed via fully franked dividends. If we assume a timeframe of 18 months as an average life of the combined payouts, we can think about what is an attractive annualized return.

Still for those that can make good use of the franking credits, the potential $2.68 coming into your pocket (circa $1.66 of that from franked dividends?) might warrant some further investigation.

I thought this is the best way to write about it rather than mentioning specific rates of return. Individuals can have a think about how the potential franking might help them.

The problem with all of the above is that it is largely reliant on residential property prices in Australia continuing to rise, and yet so many pundits continue to describe it as a massive bubble!

Vita Group Limited (ASX:VTG)                

VTG just a couple of weeks ago announced the sale of their ICT business to Telstra. This was the main part of the whole company and in the announcement have flagged the intentions that a large part of the proceeds will be paid out via fully franked dividends. In fact, with the shares trading at about 80 cents now, the company said if the deal gets approved then the fully franked dividend would likely be in the range of 39-45 cents a share. The current market cap here is currently about $130 million.

If the dividends get paid out the company will be left to focus on the remaining business called Artisan, specializing in the skin health and wellness category. Whist this side of the company is borderline profitable, the revenues are growing by more than 40%. The announcement speaks of the company leaving aside around $35 million even after paying out these dividends. The shares have fallen from 93 cents since this deal was announced as some investors were hoping for a better sale outcome to Telstra. Perhaps some of the institutional shareholders might push back on management here, try and get more cash / franking returned to shareholders? Or could they even think about voting against this deal? Plenty of uncertainty still exits.

Antipodes Global Investment Company Ltd (ASX:APL)  

APL by the end of the year should be transitioning to an open-ended exchange traded fund, which will ensure unitholders if they wish can effectively redeem shares at very close to the after tax NTA. Since this LIC started it has generally traded at a large discount.

Whilst there is a difference to what Ellerston Global Investments (ASX:EGI) did last year (Ellerston transitioned to an unlisted fund), it made me think back to this Ellerston restructure. I didn’t own EGI myself, however heard that others got quite a large franking kicker to some of their returns last year.

In fact Global Value Fund Limited (ASX:GVF) discussed this very issue in their Annual Report (EGI was their largest position). They noted that in that case the restructure effectively meant a tax crystallization event where the gap between the pretax and the post-tax NTA you see is closed. If the pretax NTA was larger, then a final tax payment from the company eventually gets paid and as a result franking credits created. Depending on timing, well in this case those franking credits move on to the open-end fund and paid out from there later on. GVF finished the FY21 with an approximate $17 million investment in the Ellerston fund, and commented they picked up circa $1 million of franking credits relating to this.

It has just recently occurred to me whether there is a bit more franking credit benefits that may come later in the APL restructure? I also have only tried to dig a bit further into this issue this week, so it is possible there is not much extra franking kicker at all. Am interested if any other holders have thoughts on this though?

At FY21 year end though I see APL had a 4 cents difference to the before and after tax NTA. If I understand the Annual Accounts correctly (disclaimer no guarantee I do!), I was wondering if essentially the 4 c fully franked dividend they paid out only a week or so ago will use up nearly all the franking credits they had at year end, well except for about $1.7 million.

Although I just mentioned a 4c difference from the before and after tax NTA at June 30, I did notice recently a lot of that has closed. Does that simply mean they have sold plenty of shares and realized gains in the last few months? Basically I was wondering if around 4c will end up being the franking credits that come across to the open ended fund structure (assuming markets and their overall portfolio don’t move much).

Anyway it doesn’t look to be too much potential here like the EGI situation might have been last year. Having said that, should investors be selling APL sometimes even in the last couple of weeks say 5.5 cents below where post tax NTA is? Implementation date should be by mid-December.

APL’s performance record is a worry though it must be said.

Perhaps if investors out there have been drawn to these situations with franking in mind, I would be curious as to their expectations here.


  • ASX LIC wind ups / restructures offering hidden franking benefits
  • M&A boom to unlock franked dividend benefits
  • ASX LICs searching for target stocks to assist with stockpiling franking credits

I touched on some of these themes late last year in this blog post below.


All of these strategies still could be increasingly relevant to benefit from high fully franked dividends as we head towards 2022.

ASX LIC wind ups / restructures offering hidden franking benefits

QV Equities Ltd (ASX:QVE) & Ellerston Asian Investments Ltd (ASX:EAI) are a couple of LICs for example that possibly could go down the path of restructures like which APL & EGI have embraced in recent times. One thing you will at least notice with these LICs such as QVE, APL & EAI is that they have been behind their high watermark performance hurdles. Looking forward at least it could result in a little relief of getting hit by future performance fees.

Once again LICs with poor track records it must be said.


Below I discuss ASX LIC performance comparison in terms of performance fees and how that can drag on returns.


M&A BOOM       

In 2021 the boom has carried on and at this stage is not seeing signs of slowing.

The 5 key drivers of the emerging M&A Super-cycle – James Hawkins | Livewire (

Often I find when a transaction initially gets announced, the market can be a little slow in realizing the franking account balance will be used up as part of the consideration of the deal.

Can WAM Capital maintain its high fully franked dividend yield?      

I made this as the headline here because it took me by surprise when I held Amaysim Australia Ltd (ASX:AYS) shares late last year and WAM Capital Limited (ASX:WAM) made a scrip takeover bid. It ticked plenty of boxes for WAM Capital. Their expensive scrip is a great asset to have in this regard as in their annual report they made mention of this deal effectively producing an annualized return of 19.9%. Whilst it may not sound exciting in this bull market it was a deal that carried very little risk for WAM. WAM acquired almost 80% of Amaysim shares prior to them delisting in April this year. After which Amaysim paid out fully franked distributions of approximately $81 million which can help WAM in the future to keep up high fully franked dividends. Icing on the cake was they got to expand their AUMs in the process.

This has made me wonder whether WAM Capital or even other LICs view the likes of Sunland Group Limited (ASX:SDG) & Vita Group Limited (ASX:VTG) with their piles of franking credits as attractive. In fact I noticed in the WAM Capital annual report they did have a holding in SDG however it was tiny perhaps because simply WAM Capital is so large these days.

Or are other LICs attracted to these situations due to the franking factor? After all it has become clear that establishing a sustainable LIC that trades at least near its NTA is helped greatly by being able to pay regular high fully franked dividends. In terms of Vita Group Limited (ASX:VTG) thus far I have observed fund managers with LICs such as Spheria Emerging Companies Limited (ASX:SEC) , Ryder Capital Limited (ASX:RYD) and NGE Capital Limited (ASX:NGE) have all highlighted Vita Group Limited (ASX:VTG) in their latest NTA reports as a key holding.

Comments welcome as always. Part of the reason of this post is I was having a lot of numbers running through my mind and it is easy to make errors trying to clarify what value is left in these sorts of situations. It can help to put some thoughts in writing to clarify your thinking. It is easy to get burnt chasing stocks just for the dividends though!


  1. That was a good read Thank You Steve
    Antipodes chairman said he franked the last dividend at 100pc instead of 50 to get rid of the franking credits and make it clean.

    Do you look at USA stocks, Steve ?
    Macquarie Infrastructure is a US stock but connected to the local bank.
    It looks like the sort of investment you sometimes write about ?

    1. Hi Peter,
      With APL your point there makes sense, so that is consistent with my assumption that franking credits remaining was close to zero after this last dividend and based off tax paid for FY21. I am thinking though for FY22 if you remain a shareholder til mid next year you may get some small extra benefit from additional franking that comes from events in FY22. The 4c different between before and after tax NTA at FY21 yearend may end up coming across as a franking credit. This I think effectively reflects tax payable for FY22. Anyway aside from that I have found it strange that the discount has been 5+ cents recently.
      I don’t hold many stocks outside of ASX as a general rule of thumb. Where I do own overseas listed stocks they have generally been related to South East Asia, or closed end funds overseas that I have been familiar with for a long time just for more diversification. I was aware that there was a Macquarie infrastructure listing on the US, but haven’t read anything about it for years. Does there happen to be some sort of event / catalyst or someone’s write up that made you look at this recently?

  2. Yes. MIC in the USA has sold both its assets made one big payment and there is one to come.
    In the last day or two it has bounced a bit closer to the final payment though.

  3. wow Steve, such a detailed article, i wish i acted when you first mentioned SDG !

    have you mentioned NGE before, i like that its highly concentrated into a Uranium and a lithium? play , has heaaaps of cash, you pay a big discount for the shares you indirectly own, and is also on a tax holiday !

    also you gonna love that it has a small holding in VTG.

    against that its small, and scale pays off i reckon….but i spose thast why the opportunity is here…off the insto radars.

    no franking credits here !

    1. Hi Simon yes I notice actually NGE sold most of their VTG at 86 after the recent news. VTG is a situation that justifies a fairly narrow trading range for now and depends on how you make use of the franking credits. I recently accumulated at 79, so I wasn’t put off that NGE were a seller according to their last report at 86.

      And with NGE yes I have been a happy holder of late and have no plans on selling for quite a while I would say. Some volume has traded 77 yesterday. I just had a look at the moving parts and the pre tax NTA could be nudging 98 cents as I write this. They have had a cracking start I would say in October touch wood. It will be volatile though. But I think the “live” discount even with the shares at 77 cents is attractive for all the points you rightly mention.

    1. Hi Juan,

      First thing to say would be I have not spent a heap of time thinking about it, because I have been trying to also watch all the takeover announcements in general so finding it hard to keep up with them. Maybe the first few days from memory when PGF announced the merger I tried to buy a bit above $1 but never got set.

      Was thinking if I am in Paul Moore’s shoes it is hard to do much to compete with the advantage of the tool Geoff Wilson has, that is expensive WAM scrip. If Paul gets too caught up in it then it won’t be good for PGF shareholders.

      Seems like Wilson is in the box seat as has been getting acceptances flow in the recent days. Also he might have room to sweeten the deal if he is keen enough to win this or at least be sure to de-rail PGF’s plans, would still be ok result for WAM.

      PAF shares might be an ok bet still but I don’t own them. Recently I have tried to pickup a bit of arbitrage returns on LICs via the TGG deal and with APL so I haven’t watched PAF so much. I also haven’t read about the stuff with the takeovers panel here so I may not have all the info.


      1. Thanks for your response Steve. From what I understand, there appears to be more advantages with a PGF merger. I think Geoff Wilson will need to sweeten the deal to get across the line. Juan

      2. Yes the more I read about it the more I agree with your comment there. It may not be compelling yet for holders to accept the WAM offer. However by the time all is said and done Wilson will probably sweeten the terms so that it is clearly superior to what PGF can propose. One example a year or two ago he sweetened a scrip deal taking over CLF (Concentrated Leaders Fund).

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