What is a franked dividend?

A franked dividend is a type of dividend payment made by a company that is subject to taxation. In Australia, this means that the company pays tax on its profits and then passes on a portion of those profits to its shareholders as a dividend. The dividend payment is "franked" because the company attaches a tax credit to the payment, reflecting the tax that has already been paid on the profits. This tax credit can then be used by the shareholder to reduce their own tax liability. Franked dividends are a way for companies to encourage investment and reward their shareholders, while also complying with tax regulations.