These FRI shares are held in my pension-paying SMSF portfolio, hence I get the full value of the franking credits in my after-tax benefit. In the 23/11/16 post I mentioned this, and provided the dividend and franking credit values. By excluding franking credits, naturally, you get a lower percentage.
Excluding franking credits, the four DPS payments for the two years ending 1/9/2016 were 4c, 6c, 3c and 4, or 17c in total. A crude average return on 150,000 shares that cost $207,934.64 would be ((150,000 x .17)/207,934.64)/2 = 6.13% per year. With franking credits this is ((150,000 x .17/.7)/207,934.64)/2 = 8.76% per year.
In November I concurrently devised a more complex calculation in the style that a bank would in a statement for a monthly-paid loan, and the percentage was, as one should expect, lower. It was 7.837% for the franking-credits-included scenario.
In summary, all I wanted to convey was that in my tax setting, the returns from investing in FRI have been OK, in spite of the high average SP for those 150,000 shares.
If when I know what DPS will be paid in August/September 2017, I repeat the calculation for three years, then my crude calculation would be different. For instance, if the DPS transpires to be 7c, and I use my current holding of 193,000 shares that cost $243,864.64, then the crude franking-credit-included calculation would be ((193,000 x .24/.7)/243,864.64)/3 = 9% per annum. My average cost per share would be $1.264. With returns exceeding 8%, I can wait a long time for the SP to recover. Obviously, I do not know what the DPS will be.
It is relatively rare for core directors to buy shares, and not make a capital gain in the long term. On this basis, the consistent accumulation of shares by Messrs Chan & Pateman gives me confidence that FRI's SP will rise in coming years, so I fret not over the matter.
