For the last several years, there has been a note on 'Income Tax Expense' (note 11 in AR2016) that outlines a bridge from the 'nominal company tax' that would be paid at the company rate of 28% to the 'actual tax paid'. I have constructed the table below from the last five years of this information.
|
Prima Facie Income tax @ 28% {A} |
Prima Facie Income tax @ 28% |
Implied Earnings Imputed Percentage |
Imputation Credit %ge Available for Dividends (*) |
FY2016 |
$55.235m |
$51.597m |
93% |
100% |
FY2015 |
$47.840m |
$42.114m |
88% |
100% |
FY2014 |
$35.994m |
$30.014m |
88% |
100% |
FY2013 |
$47.018m |
$40.538m |
77% |
96.25% |
FY2012 |
$50.073m |
$39.962m |
80% |
100% |
(*) Assuming an 80% payout ratio, in accordance with the dividend policy stated in AR2016 p8: "in line with out stated dividend policy of distributing at least 80% of normalised NPAT to shareholders each year."
Actual tax paid in any one year could fluctuate. For example, There might be a difference in timing of terminal tax based on inaccurate prior provisional tax payments that means that the tax paid in a particular financial year might not equate to 28%, even if the tax bill did come to 28%. Over the years though, such differences should average out.
Imputation credits are earned on all earnings for which tax is billed and paid. This means that if a company does not pay out 100% of earnings in dividends (the case for Sky City), there should be a gradual build up in the imputation credit account. This in turn means that in a lean year (like FY2013), there should be some surplus imputation credits that can be paid out to shareholders, should management dictate that dividend payments should be maintained above actual earnings for that one year.
The above table shows that in all years but FY2013, there should have been enough imputation credits to pay out fully imputed dividends to all shareholders. However, if you look at the actual payment record over the last five years (my post 512), only one dividend of the ten was paid out 'fully imputed''. If there were even a few imputation credits in the bank in FY2013, it should have been possible to pay out
all ten dividends as fully imputed! So why was only one dividend paid out fully imputed? I am truly baffled. It doesn't make sense.
And lest anyone think I am getting hung up on a minor technical point, the difference between 'paying out dividends as they did' and 'fully imputed' changes the valuation of the company from $3.50 to $4.23. And that makes all the difference as to whether the company is an invest-able proposition going forwards or not.
SNOOPY