That's true, but because the transaction giving rise to the...

That's true, but because the transaction giving rise to the profit occurred in the current financial year the tax won't be paid until next year and therefore the franked dividend could also not be paid until new financial year, but yes it is certainly an option.

In the same vein there are two types of buy backs, an on market buyback (my preferred option) without franking component, or off market buyback (similar to Telstra style buy backs with high franking level).

I prefer the former because I believe it will soak up loose stock and overhang boosting share price and equally benefiting all remaining shareholders, whereas the latter is more often taken up by different classes of holder such as superfunds, depending on their tax positions, (which could include directors and other long termers), scaled back according to demand and likely to have less impact on share price in the short term.