BlogInvesting Tips

3 reasons why you need to be tracking dividends

by Doug Morris, CEO, Sharesight

Income received from share dividends is a critical part of household income for many Australians, particularly self-funded retirees. In this age where the RBA cash rate has been on hold for over two years at only 1.5%, investing in listed companies that pay dividends is one of the best places to achieve high yield.

Dividend tracking might seem ‘unsexy’ compared to tracking capital growth, but dividends have a material impact on your investment returns, so it’s critical to ensure you’ve got the complete picture.

Did you know that while an ETF (such as ASX:STW) that tracks the ASX 200 lost ground over the past 12 months, dividends added over 6% to its total return?

Merely tracking the cash you receive from dividends doesn’t go far enough. To get the full picture of the impact of dividends on your investment performance, you need to understand:

Tracking dividends

Tracking cash from dividends

Understanding which investments cash dividends come from and how they impact your investment return is an admin nightmare. Listed companies, exchange traded funds (ETFs), and managed funds outsource the responsibility of tracking who owns shares, and who is paid dividends to share registries.

In Australia there are six different share registries. The most common ones investors will encounter are Computershare and Link Market Services. This means that to get an accurate record of dividends received across an investment portfolio, investors will often need to pull together dividend data from the web sites of multiple registries, or pour over mailed dividend statements for each holding.

For one of the holdings in my portfolio, Telstra (ASX:TLS), the registry electronically deposits cash dividends to my bank account. This is great (some companies send paper cheques instead), but even though the dividend is deposited to an account with the same institution that I use for brokerage, the broker has no visibility on the source of this cash, so they can’t calculate the dividend yield from it.

Using a dedicated investment portfolio tracker like Sharesight can help remove this admin nightmare. Sharesight sources dividend information directly from over 25 stock exchanges around the world, automatically calculating your dividend yield for each holding regardless of whether the dividend if paid electronically, or via cheque.

Telstra Dividends 2019 - Sharesight

In Telstra’s case, over the past year, I can see that dividends accounted for over 10% of my total return. Not only that, but by looking back over the entire period I’ve held Telstra shares I can see every dividend received since I first bought TLS.

Dividend tax implications

Depending on the investment type and your home country, dividend income is typically taxed at the same rate as ordinary income. In Australia however, there is added complexity from dividend franking credits as well as the attribution managed investment trust tax structure used by ETFs and managed funds.

Looking at the bank account the registry deposit dividends to won’t help, because you’ll only see the net amount paid. Going to the registry for the information needed to calculate dividend tax implications is a good start, but the registries fall short in two ways. One, you will likely still need to rely on multiple registries to compile a portfolio-wide tax picture. Two, they will sometimes only provide you with the most recent financial year’s data for free, charging you a fee if you need access to information from previous years.

Fortunately, Sharesight receives the same dividend and franking information the registries do (minus the official statements). This means that any franking credits are automatically recorded and can be used to easily calculate your taxable income on these investments.


Taking it a step further, this also means that it’s quite easy to calculate the impact of dividends on your taxes across your investment portfolio, as these figures are wrapped up into a single Taxable Income Report which breaks out non-trust from trust income, and domestic from foreign income.

The impact of dividend reinvestment

Assuming you don’t immediately need the cash income from dividends, some Australian companies allow you to automatically reinvest dividends in the company via their registry. This allows you to stay as fully invested as possible, without incurring additional transaction costs. Unfortunately, dividend reinvestment plans (DRPs) further complicate managing your investment portfolio for the following reasons.

First, because the DRP is managed by the share registry and not your broker, the broker will have no visibility into dividends that are reinvested. Second, when a dividend is reinvested, shares are ‘bought’ for you at a specific price. This means that the cost base and the amount invested is constantly changing and will have tax implications when disposing of the shares. It also makes it difficult to calculate your true performance, with any return calculations reliant on the cost base.

DRP - all trades - Sharesight

I use dividend reinvestment plans personally for any ETFs I own when they are available, with Sharesight able to automatically calculate the impact of dividend reinvestments on my cost base and performance figures.

Track your dividends with Sharesight

Sharesight was built for investors like you, and makes it easy to keep track of your portfolio. Here’s how:

  • Automatically track your daily price & currency fluctuations, and handle corporate actions such as share splits.
  • See upcoming dividend payments with the Future Income Report.
  • Calculate your dividend income with the Taxable Income Report.
  • Get the full picture of your investment performance, including the impact of brokerage fees, dividends, and capital gains with Sharesight’s annualised performance calculation methodology.

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We do not provide tax or investment advice. The buying of shares can be complex and varies per individual. You should seek tax and investment advice specific to your situation before acting on any of the information in this article.
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