Background: Baby Bunting is Australia's largest baby goods store. It sells prams, bouncers, booster seats...you name it. In 2015, the company went public.

What happened: The baby lords have had a stellar start to the 2022 financial year. Total sales for the first 6 months reached $239.1 million (up 10% on the same time the previous year).

What else: With net profits after tax also up 12.2%, Baby Bunting's shareholders are set to receive a juicy...chunky...fully-franked dividend of 6.6 cents per share for the first half 🤤🤤.

So what's the key learning?

💡There are two main ways a company can pay a dividend: a fully-franked dividend...and an unfranked dividend.

💡Let's break it down:

• An unfranked dividend is where a company makes a profit, hasn't paid tax on that profit and then pays a dividend to shareholders.
• A fully-franked dividend is where a company makes a profit, pays tax on that profit and then pays a dividend to shareholders from the profits left over. FYI, shareholders also pay tax on dividends.

💡However, when your dividend is fully-franked (like Baby Bunting's) it comes with a franking credit. This offsets the tax the shareholder would pay (because the business has already paid it) and reduces your taxable income.

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