there are other dedicated threads on this so have a look for more detail.
If you buy with the intention to profit from selling, then it is deemed to be income, not a capital gain.
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Electricity demand in NZ is forecast to grow at around 1.2% per annum over the foreseeable future, so any meaningful growth for Meridian in terms of capacity would need to come from offshore investments eg: that wee hydro they are looking at in Queensland. Meridian have a combined hydro and wind portfolio of 2,744MW, so to grow at a humble rate of let’s say 10%, they would have to build 274MW per annum. Hmmm, entirely unlikely ?
Consider also that since 2007 there has been an enormous amount of power station construction in NZ and the market has switched from being slightly constrained to being slightly over supplied. This is one of the reasons CEN has been trading in such a tight range over the last 4-5 years.
Meridian should be a fantastic dividend stock though for those who pick up the IPO incentives, well better than mum and dad leaving their hard earned cash in the bank.
I’m still trying to reconcile if the IPO incentives are worth more than just waiting for a better entry point during dryer event times, the hydrology is about average at present. Need to do some more work on this.
Attachment 4866
UK labour party talking about a freeze on utility bills if they come into power.
Expect NZ labour party to follow
Maybe some one in NZ Labour party will have read Muldoon's book and realise that price freezes do not work.
NZ doesn't have have CGT, but some doesn't understand that if you are in a taxable activity, intentions of engaging in business for gain/loss. Every dollar earned is taxable.
Thats why I am confused when people say that those who buy and sell houses doesn't pay tax. They'll have to pay income tax on gains made, as this becomes taxable activity under Income tax act.
If you may think we have government intervention here, take a look at how totally crazy Queensland is, Labour put a freeze on power prices, and guess what, power companies stopped building, why would they with that sort of risk, and now the Govt is increasing power prices by 22.6%, gee what a surprise ?
http://www.brisbanetimes.com.au/quee...531-2ng00.html
MAC.
Thank you for the link.
No surprises there.! lol.
Asides from the fact that P/E ratios for NZ electrical utilities are completely meaningless.
Yes, I heard of a builder who successively built houses, lived in them while he built the next one and sold the ones he moved out of as if they werwe private property. IRD are not stupid, they caught up with him and he went for a skate big time. If you know someone who is making big bucks ripping of the tax system then understand that we are all paying for it. You can always write a anonymous letter to IRD. They are obliged to follow up on all anon info.
Well they do have different laws specifically for builders and land dealers. I believe they would get an exemption for private residential property under certain conditions, but from what I understand its a guilty until proven innocent situation. So once they found out he was a builder I'd expect him to need some solid proof.
hmm.. IMO, I think the meridian offer is quite attractive due to the dividends.
If we go by the price of $1.60 and a dividend yield of 8% from the second year onwards, we get quite an attractive capitalisation rate.
12.8 cents / 0.055 (a 5.5% bond rate) gives meridian a value of $2.3
12.8 cents / 0.06 (a 6% bond rate) gives meridian a value of $2.13
Tehy have forecast dividends of 10.5c for 2014 and 11.5 for 2015 - net.
But even so, the yeild compares favourably to the likes of CEN, TPW, MRP, VCT which are in the 5-6% range. Comparable to CNU
Disc: just halved my exposure to CEN, AIA and IFT for the upcoming IPO. Also hold TPW and CNU.
But what about the fact that for the year to June 2015, the company plans to raise its annual dividend rate 9.5% to 11.5 cents (plus some imputation tax credits). However that equates to 140% of its forecast profits. How are they going to sustain this? This is just too ludicrous to be funny. So in 2014 they are going to distribute 144% of forecast profits and in 2015 140%. So really all this talk of yields is IMHO just silly.
Are they not in the process of selling off a pile of land which would give them the ability to pay out the higher dividend?
Maybe they are selling land to pay dividends. But is doing that sustainable? I mean if you have to sell capital, borrow, or issue more shares to pay dividends...... not really a reliable long term model is it. If a company is going to pay out more than it's profits then they will have declining growth. These "high yields" are there to attract the punters, a marketing gimmick. And most will fall for it too. So much so that I am intending to purchase some Meridian because I think it will do ok in the short term.
Profit is distorted by non cash items - mainly depreciation on revalued assets.
They are paying out less than 100% of free cash flows, which is the amount of cash they have after doing all the required maintenance.
Meridian are one of the largest farmers in the country with all that grazing land acquired for their failed project Aqua in the Waitaki valley, sooner or later they will either sell it all or have another go at getting a resource consent, I think the latter is unlikely ?