MEL - Meridian Energy

[axe]

After the call on the installment receipts will MEL be included in the NZX10?

[Xerof]

Tyro,

interesting isn't it? Clearly not seen as a traders stock, and likely most of the stock is buried in the long term portfolios.

It has a very strong correlation to the rise and fall of various political parties at the moment.....

Start a new thread and see what happens....

[kyanar]

Sorry if this seems like a stupid question, but what's with the sudden rise in the MELCA share price? It went ex-dividend yesterday, and all the rudimentary stuff I've read says that once a stock goes ex-div the price usually declines by roughly the dividend amount to reflect that it's no longer entitled to that dividend - whereas MELCA has done pretty much the opposite!

[Harvey Specter]

It declined by the amount of the dividend at open yesterday but then just continued on its current rise, mainly driven by Labours poor showing in the polls making its NZPower plan less likely to see the light of day. All powerco's are on the rise I think.

[silu]

simple really!!!! MEL was sold as a bargain, the best long term asset play I have ever seen.

Agreed. Couldn't believe that I was able to fill my boots with more at 89c.

[Master98]

Agreed. Couldn't believe that I was able to fill my boots with more at 89c.

your gain and others lose that's reality of share market, good on you.

[bull....]

ill stick with my earlier post 20c in it + divs after 18 mths more if nat win election

Looking good

[macduffy]

A vote of confidence here. NZAS to recommence spending on Tiwai Point.

http://www.stuff.co.nz/business/indu...or-Tiwai-Point

[Snoopy]

They have forecast dividends of 10.5c for 2014 and 11.5 for 2015 - net.

But even so, the yield compares favourably to the likes of CEN, TPW, MRP, VCT which are in the 5-6% range.

Now all of the power companies are 'on the table', the question arises how should the income investor choose which is the best in terms of forecast dividend payment?

Nominally the FY2014 yield, based on the 117.5 MELCA most recent closing price is:

10.4/117.5= 8.85% (net)

But Meridian is different because there is a 50c per unit capital payment due in May 2015 (approximately one year away). One way of accounting for this is as follows.

Assume that you as an investor have that "50c per share" tucked away somewhere earning interest, at say 4.5% per annum. Assume that the money is in a PIE and pays 28% tax. That means the after tax return you would receive is:

4.5% x (1-0.28) = 3.24%

Because you don't have to stump up that 50c for a year, you can invest less than 50c and let the interest make the balance up to 50c in a year's time. What balance 'B' would you have to invest to make this happen? You can calculate it by solving the following equation.

B x 1.0324 = 50c

So B is 48.4c.

In reality, over the next year it is the government that is saving you 50c - 48.4c = 1.6c per share, by letting you have a year from now to pay the final 50c. This gives you as a shareholder a net 1.6c per share in your pocket. That 1.6c is to you the benefit of holding MELCA instalment receipts today and not MEL shares. So you should take that 1.6c off the fully paid up share price to get a comparable yield with other power companies.

10.4 / (117.5 + 50 -1.6) = 10.4 / 165.9 = 6.27%

That is my answer, based on my way of looking at the circumstances. Interested to hear if others see it the same or differently.

SNOOPY

[barleeni]

I'm surprised MEL doesn't get much chatter on this forum, or is there another thread somewhere else regards Meridian?

Anyhow, just wondering peoples thoughts on the possible reaction come Monday on the back of the sell off of the US solar stuff, as well as the news about Tiwai and their 20 million back pay saga. Will that flow through to the Meridian SP?

I have a sell order for some of my stock at $1.25 but I am thinking there's not too much chance of that going through anymore in the near future............