Hypothetically: $1mil after tax paid cash to use for a share portfolio.
Purpose: To provide income to live.
All the cash used to purchase shares which provide at least a 5% dividend yield, and all 100% franked. This will be a limited amount of shares, but achievable? ASX top 200, or is that risking it a bit, and should aim for a select few in ASX top 50?
$1mil x .05 = $50,000 per annum. Then due to the franking credits, $50,000 / .7 = $71,428
Assuming no other income from wages, property, cash interest. Assuming no other margin lending either (unless of course you can put forward a scenario which will benefit).
Inherent risks: Possible capital erosion, Business lower or cut dividends, franking credits reduced or cut. (If margin lending, you can include margin call, and payment of interest).
This by the way is not my strategy. It may well be part of my overall strategy, but ascertaining the workings of the dividends and the franking credits. Because I hold property and draw a wage from my business, the above scenario wont apply, as the franking credits will be altered and Ill pay a higher margin of tax on the dividend income above the 30%.
I also understand the basics of company intrinsic value, so wont just be dumping large amounts of cash in the market over a matter of days or weeks, but waiting until a sound entry position.
Further to the above, I could then work and receive an income of $18,000 p/a (lowest tax threshold rate before tax kicks in), and not pay a single cent in tax? My wife could also do this? Giving an income of $107k p/a for 2 shifts a week at Woollies or Bunnings?