MEL - Meridian Energy

[Theracay]

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 th at 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.

[baller18]

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

[percy]

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

baller18,
Thanks for doing the maths.

[CJ]

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.

[baller18]

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.

Thanks for clearing that up for me CJ! Much appreciated!

[blackcap]

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.

[777]

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?

[blackcap]

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.

[CJ]

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.

[MAC]

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?

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 ?