CBA had a buy back weighted towards dividends. Approx 65% of their buy back as a percentage of volume weighted price was in dividends. Woolworths was even better at close to 75%. It is a very simple calc. The more dividends you give in buy back more the franking credit. A 65% dividend component gives you a 28% franking credit (at 3/7 of 65%) which then more than offsets the 14% discount.
WBC was at best close to 40% on the share price when it was announced and has since dropped to about 30% of current price ($20.5). Who ever was designing it failed to see that they weren't distributing enough franking credits to make it attractive even to tax advantaged group. Hopefully when the buy back flops they will learn a lesson.
WBC Price at posting:
$20.49 Sentiment: Hold Disclosure: Held
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