There are many detractors from investment returns. Tax, transaction costs, management fees, inflation. The list of additions is much shorter.

It is no wonder that many Aussie investors place preference on ASX shares that offer a franking credit. My colleague Mark LaMonica has written about how valuable franking credits actually are for investors—an important consideration when allowing investors to appropriately weight them in investing decisions.

His conclusion in his model is that the same share listed in Australia would be worth around 10% more to an Australian investor than a global share. This is not an amount to sneeze at.

Adding to their appeal, Australia’s median income sits at a 30% tax rate. Fully franked dividends provide a 30% tax credit.

That is a dividend which requires a payment of 0% in personal income tax.

No investment decisions should be based on how much tax you can save. However, it is important for investors to think about the total return they receive from an investment.

Here are three, five-star^ stocks with fully franked dividends (at 25 June 2025).

Woodside Energy WDS ★★★★★

  • Fair Value estimate: $45 (46% discount at 28 October)
  • Moat: None
  • Uncertainty Rating: Medium
  • Star Rating: ★★★★★

Woodside’s (ASX:WDS) third-quarter production declined 4% on a year ago, but 2025 production guidance increased nearly 2% to 192 to 197 million barrels of oil equivalent. Capital expenditure guidance also declined, given the timing of sustaining capital expenditure. Shares rose about 4% on the day.

Why it matters: Despite a 9% fall in quarterly revenue versus last year, the result was solid, with stronger-than-expected production, especially from its Sangomar operations. Our unchanged full-year production estimate of 194 mmboe sits comfortably within the new guidance of 192 to 197 mmboe.

  • Meaningful growth is in train, and we expect group production to increase to 225 mmboe by 2028. Scarborough is 91% complete, with its first LNG cargo due in the second half of 2026. Beaumont targets first ammonia production late this year and Trion is on course for first oil in 2028.
  • The addition of low-cost LNG from Scarborough should support margins—the project will contribute about 14% of the group’s total production by fiscal 2027. We assume midcycle EBITDA margins improving to close to 70%, modestly higher than the current 67%.

The bottom line: We raise our fair value estimate for no-moat Woodside by 2% to $45 per share, reflecting the strong quarter and the time value of money. We think the shares are cheap, trading at almost half of our fair value estimate.

  • The energy transition creates uncertainty for investors and casts a pall over hydrocarbon demand. But investment is likely needed to backfill the naturally declining supply. We think Woodside’s growth is overlooked and underestimated by investors, and supports our fair value estimate.
  • We forecast a five-year EBITDA compound annual growth rate of negative 1% over the next five years. This assumes increases in production as well as a Brent crude price improving to a midcycle price of USD 65 per barrel. But growth is not needed, given the undemanding multiples and fat forecast dividend yield of 8% in 2026.

Bapcor BAP ★★★★★

  • Fair Value estimate: $5 (49% discount at 28 October)
  • Moat: Narrow
  • Uncertainty Rating: High
  • Star Rating: ★★★★★

Bapcor’s (ASX: BAP) fiscal 2026 first-quarter revenue was about 3% lower than last year. The company expects full-year underlying net profit of $51 million-$61 million, 30% lower than last year at the midpoint, heavily weighted to the second half.

Why it matters: We cut our fiscal 2026 underlying net profit forecast by 36% to $60 million. We reduce our longer-term forecasts by about 19% due to lower profitability at baseline and weaker retail performance. In his words, CEO Angus McKay is dealing with “the sins of [Bapcor’s] past.”

  • Excluded from underlying guidance is a pretax hit of $12 million relating to inventory adjustments and a margin impact in the tools and equipment business following a stocktake. While further detail was lacking, real profitability in Bapcor’s trade segment was likely lower.

The bottom line: We lower our fair value estimate 17% to $5 per share due to lower earnings at midcycle. Shares appear materially undervalued. We think the market is concerned about Bapcor’s turnaround and its timing, persistent weakness in retail, and share losses in trade.

  • But we think McKay is focusing on the right things: business simplification, cost reductions, and investment in the competitive advantages in trade, which underpin Bapcor’s narrow economic moat.
  • Bapcor is a fundamentally solid business, albeit in turnaround. Years of noncore acquisitions have been poorly integrated. This has introduced complexity and duplication to the neglect of the core trade business. Bapcor is now paying for these missteps

Between the lines: The potential for further skeletons in the closet is a concern. The inventory issues are the second such discovery of questionable operating practices following July’s disclosure that retained earnings were overstated by about AUD 24 million over four years.

  • Individual discrepancies are historical and relatively minor. But the aggregate conclusion is a business with weaker earnings power than previously appeared to be the case.

Beach Energy BPT ★★★★★

  • Fair Value: $2.60 (52% discount at 25 June)
  • Moat: None
  • Uncertainty Rating: High
  • Star Rating: ★★★★★

Beach Energy (ASX:BPT) Midsize Australian oil and gas company Beach Energy reported an 8% increase in fiscal 2026 first-quarter production to 5.0 million barrels of oil equivalent. Final start-up procedures are underway for the Waitsia Stage 2 gas project with gas introduction imminent.

Why it matters: Watsia Stage 2 comprises 25% of our Beach fair value estimate. When at full capacity, it will produce around 250 terajoules per day of gas, of which Beach’s 50% equity share equates to just under 8 mmboe per year, or a 40% increment on current group production rates.

  • Watsia Stage 2’s gas will fetch LNG export pricing. Beach sold two Waitsia LNG cargoes in the quarter, using predominantly purchased and swap gas. These attracted an average $15.10 per mmBtu. In comparison, Beach’s domestic gas sales averaged $11.10 per mmBtu.
  • Higher-priced Waitsia LNG sales and improved domestic gas prices bode well for future Beach earnings. Domestic gas price achievement increased 8% in the quarter, following favorable re-contracting in the Cooper Basin.

The bottom line: Our $2.60 fair value for no-moat Beach Energy stands. Including Waitsia, we project a five-year EBITDA CAGR of 9% to USD 1 billion by fiscal 2030. This includes improvement in EBITDA margin to 60% against fiscal 2025’s 52%, and a midcycle Brent crude price of USD 60 per barrel.

  • At around $1.13, Beach shares remain materially undervalued; the market is concerned by repeated cost blowouts at Waitsia. However, we think the company is now well-placed to build upon Waitsia’s imminent cash flows with capital expenditure finished.

Key stats: We increase our fiscal 2026 EPS forecast to $0.19 from $0.14 after lifting expected production, capturing additional Waitsia LNG sales, and improving domestic gas pricing. Our $5.8 cent DPS forecast equates to a fully franked 5% yield at the current share price.

  • Net debt/EBITDA remains modest at just under 0.4, with potential for a share buyback upon Waitsia’s commissioning.

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Terms used in this article

Star Rating: Our one- to five-star ratings are guideposts to a broad audience and individuals must consider their own specific investment goals, risk tolerance, and several other factors. A five-star rating means our analysts think the current market price likely represents an excessively pessimistic outlook and that beyond fair risk-adjusted returns are likely over a long timeframe. A one-star rating means our analysts think the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.

Fair Value: Morningstar’s Fair Value estimate results from a detailed projection of a company’s future cash flows, resulting from our analysts’ independent primary research. Price To Fair Value measures the current market price against estimated Fair Value. If a company’s stock trades at $100 and our analysts believe it is worth $200, the price to fair value ratio would be 0.5. A Price to Fair Value over 1 suggests the share is overvalued.

Moat Rating: An economic moat is a structural feature that allows a firm to sustain excess profits over a long period. Companies with a narrow moat are those we believe are more likely than not to sustain excess returns for at least a decade. For wide-moat companies, we have high confidence that excess returns will persist for 10 years and are likely to persist at least 20 years. To learn more about how to identify companies with an economic moat, read this article by Mark LaMonica.

^ What do the different star ratings designations mean?

5 stars indicates an investment idea with a high probability of significant risk-adjusted appreciation from the current market price during a multi-year time frame. Scenario analysis developed by our analysts indicates that the current market price represents an excessively pessimistic outlook, limiting downside risk and maximizing upside potential.

4 stars indicates that appreciation beyond a fair risk-adjusted return is likely.

3 stars indicates that investors are likely to receive a fair risk-adjusted return (approximately cost of equity).

2 stars indicates that investors are likely to receive a less than fair risk-adjusted return and should consider directing their capital elsewhere, in our opinion.

1 star indicates a high probability of undesirable risk-adjusted returns from the current market price over a multi-year time frame. Our scenario analysis indicates the market is pricing in an excessively optimistic outlook, limiting upside potential and leaving the investor exposed to capital loss.