MEL - Meridian Energy

[bull....]

Results this week what are people thinking divi wise ? Chance of special divi etc ?

at the annual meeting the management commented some shareholders are not happy about special divs as they are fully taxed so they may consider buy back.
be interesting to see what they decide

[xafalcon]

at the annual meeting the management commented some shareholders are not happy about special divs as they are fully taxed so they may consider buy back.
be interesting to see what they decide

The results of share buy-backs are always difficult to quantify - CEN is a great example right now. On paper buy-backs are a more efficient way to return capital to shareholders, but shareholders must sell shares to realise the return and there is a cost involved in selling. But a dividend is something every shareholder receives an immediate benefit from. For me, I would take the dividend every time, even if imputation credits are not available

[Sideshow Bob]

at the annual meeting the management commented some shareholders are not happy about special divs as they are fully taxed so they may consider buy back.
be interesting to see what they decide

Also likely to make it problematic given the government own 51.02%. So then would have to acquire some from them, or otherwise increase their proportion of the company.

But if fully taxed, their major shareholder wins both ways!!

[xafalcon]

Also likely to make it problematic given the government own 51.02%. So then would have to acquire some from them, or otherwise increase their proportion of the company.

But if fully taxed, their major shareholder wins both ways!!

Nobody is forced to sell - shares would be bought-back on-market.

MRP did this a year or two back.

[Harvey Specter]

Nobody is forced to sell - shares would be bought-back on-market.

MRP did this a year or two back.

His point was the govt shareholding would increase above 51%. Not really a major in my opinion and would give them the ability to raise some quick cash if they ever needed to.

[sb9]

I think market is pricing in good outcome tomorrow.

[boysy]

Yep a strong end to the day still below recent highs though

[Snoopy]

The results of share buy-backs are always difficult to quantify - CEN is a great example right now. On paper buy-backs are a more efficient way to return capital to shareholders, but shareholders must sell shares to realise the return and there is a cost involved in selling.

xafalcon, what you say about the immediate realisation of a return is correct. But all remaining shareholders do benefit from the buyback. Beacuse as shares are bought back and cancelled, that means the profit in the future will be shared out between a smaller number of shares that remain on issue IOW eps increases for those shareholders that remain. And that means should a remaining shareholder decide to sell at a later date he/she should get a higher price than they otherwise would have, because of the buy back.

SNOOPY

[macduffy]

Yes, but I think the falcon's point was that a buy-back doesn't provide the immediate benefit - cash in the pocket - that a dividend does. I would add that it sometimes becomes difficult to appreciate that a buy-back has really had a beneficial effect on the shareprice, due to the influence of other, especially market, causes/conditions.

[xafalcon]

xafalcon, what you say about the immediate realisation of a return is correct. But all remaining shareholders do benefit from the buyback. Beacuse as shares are bought back and cancelled, that means the profit in the future will be shared out between a smaller number of shares that remain on issue IOW eps increases for those shareholders that remain. And that means should a remaining shareholder decide to sell at a later date he/she should get a higher price than they otherwise would have, because of the buy back.

SNOOPY

I understand the theory of buy-backs being better than special dividends. But the theory cannot be proven one way or the other - there is no "control group" against which to compare the 2 options.

The slight increase in regular dividends as a result of cancellation of 0.001% (hypothetical example) of shares on issue is so tiny it is inconsequential.

So it comes down to the increase in SP (less brokerage required to realise the gain in SP) v's a special dividend (less any tax liability). If shares aren't sold immediately, interest (or other investment returns) must also be factored. Note that I'm not saying all shares must be sold, just enough to maintain a constant dollar value investment, the same as holding all shares after a special dividend

But I also can't prove that special dividends are the better option. However an old saying springs to mind "a bird in hand is worth two in the bush"

But I have watched MRP and CEN work through buy-backs. With the SP falling part way through the buy-backs, which goes against the theory. IMO market sentiment was a much more powerful force. Hence my preference for a special dividend