Question 1: I’m looking to invest in the ETF, HACK. I’ve noticed that over the last nine months, the amount of shares on issue has increased from 10MM to 18 MM. Surely this must be diluting the share price and the dividends. Can you give me your thoughts, please?
Answer (by Paul Rickard): Thanks for the question. Like all ETFs, HACK is an open-ended fund, meaning that it grows or shrinks depending on investor activity and the role of market makers. From an investor’s perspective, the only downside from being open-ended is whether the growth inhibits the ability of the manager to find attractive investments. Personally, I’d be surprised if HACK had yet reached this size. The demand and supply for HACK does not affect its price, it’s the share prices of the stocks the ETF holds that determines that.
Question 2: I note in the BHP buy-back information that part of the arrangement is “a fully franked deemed dividend.” From the ATO website, they say “DEEMED” means the dividend is from the company accumulated franking credits. Does this mean shareholders will receive all the dividend money as a franking credit, which can be claimed from the ATO in due course?
Answer (by Paul Rickard): Yes, all but 38 cents (the capital component). Please have a look at my article in the Switzer Report. [1]
Question 3: I’d like your thoughts on WAM. It’s trading around $2.35 at the minute. It’s not normally a stock that drifts around too much, especially around dividend time and especially downwards. I’m a long-term holder of WAM and would appreciate your thoughts on it.
Answer (by Paul Rickard): Thanks for the question. A great investment track record but weak on transparency (they still haven’t reported an NTA for October at 12 November) and trading at a premium, very vulnerable to a change in the franking credit provisions. I don’t buy Listed Investment Companies trading at a premium.
Question 4: Will the benefits of the RIO and BHP buy backs be impacted if Labor gets its proposed abolishing of claiming franking credits through parliament before 30 June 2019?
Answer (by Paul Rickard): Thanks for the question. No. The ALP’s policy change will only apply to dividends received on or after 1 July 2019.
Question 5: I’d be interested to know what sort of fees I should be expecting to pay my “Wealth Advisor” and what sort of services are usually provided for the fee. I pay a % of the total SMSF assets, which is currently 0.4% on assets of $2.5million. I negotiated that figure but have no idea where it fits into the ballpark of fees.
Answer (by Paul Rickard): Without knowing exactly what services your wealth advisor provides you, prima facie, 0.4% sounds like a reasonable fee. I think you’ve done well to negotiate this fee as lots of people pay 1%.
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