Macquarie has found the Australian companies with the biggest potential for buybacks and special dividends

(Photo by Tristan Fewings/Getty Images for SunLife)

Macquarie’s data services team has put together a comprehensive list of franking credits across Australian corporates.

Franking is the system by which Australia’s government gives a tax credit to shareholders receiving dividends as compensation for the corporate taxes a company has already paid. It is meant to avoid double taxation and allows a company to pursue capital management by returning the credits to shareholders via off-market share buybacks or special dividends.

BHP and Rio Tinto continue to carry the most franking credits given the two miners make most of their earnings in Australia, but only use a part of their franking thanks to their dual listings.

The following table shows the top five companies with franking credits.

And this scatter plot shows the growth in franking account balance. Westpac has grown its franking balance strongly, while Newcrest Mining’s has continued to cede ground.

Finally, this chart from Macquarie displays franking credit balances as of a percentage of market cap

When compared to December 2015, retailer Reject Shop and television station Ten Networks saw the largest increase in franking credits as percentage of market cap, mainly due to their weakening share prices, Macquarie said.

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