Company makes profit. Pays tax. Distributes cash, plus a tax credit( which cost them nothing, they have already paid it). If they send you the cash( which is the same amount as above) , without the tax credit, you just get to pay tax on it. The other thing to remember is that companies can't pay different shareholders different sorts of dividends. Now companies may change their leverage so as not to pay any tax, then the dividends are unfranked. They may also change their structure to a trust, the distributions of profit are then not taxable in the trust, so no company tax, but taxable in the hands of the unit holder. cheers
