MCY Mercury NZ ( MRP Mighty River Power)

[Aaron]

Can anyone explain why MRP is paying out in dividends 3-4x what they are earning, despite having massive debt. It would appear they are borrowing not for expansion, but to pay dividends.I think paying dividends while owing money makes little sense, as you are borrowing, paying interest, just to pay dividends.Mainly to the Govt as they are major shareholders.

Friday afternoon should be working but I will have a crack.
2015 Cashflow Statement page 29 of the annual report. Operating Cashflow +$309mill; Capital Investments -$103mill; Divs -$260mill $54 mill shortfall $65mill extra borrowings leaves a $11 million increase in cash. One way to look at it is they borrowed 52% for capital investments (54mill/103mill) and paid the dividends out of operating cashflow.
I think with infrastructure companies you hope they aren't skimping on maintenance to pay out big dividends a la Kiwirail. Hopefully we aren't like sir Michael Faye & David Richwhite happy to take what they can get and let the taxpayer pay for it (f**king ars***les)

[h2so4]

Not sure what you are trying to say here but it looks wrong. If you are trying to reconcile the income with the operation cashflow then start with the income $47m plus the depreciation $170m then add and subtract operating and investing activities. I'm sure you will see a different picture..

[Snow Leopard]

Can anyone explain why MRP is paying out in dividends 3-4x what they are earning, despite having massive debt. It would appear they are borrowing not for expansion, but to pay dividends.I think paying dividends while owing money makes little sense, as you are borrowing, paying interest, just to pay dividends.Mainly to the Govt as they are major shareholders.

I would contend that they are not

"paying out 3-4x what they are earning"

and do not have

"massive debt"

But then I have read the last few years of the companies financial accounts.

Best Wishes
Paper Tiger

[trader_jackson]

I would contend that they are not

"paying out 3-4x what they are earning"

and do not have

"massive debt"

But then I have read the last few years of the companies financial accounts.

Best Wishes
Paper Tiger

I would completely agree with this... I'll say it again, looking simply at the 'net profit' and PE ratio is NOT a good way to value MRP or any electricity company

DYOR

[Crac A Jac]

I think their debt is 1.1 billion.Massive enough for me.So in effect borrowing to pay dividends.
Why not pay it off, rather than suffer interest costs on this; dead money.
I know people talk about debt/equity ratio being OK, but is it really good debt??, or just backdoor cashflow for the Govt.
I am involved in a small private company which had debt; various business type shareholders advised paying dividends while in debt, mumbling about debt/equity ratios, I objected and was over-ruled marginally by a vote, but I note the policy was actually changed by fiat by the Directors so no dividends were paid for 5 years, debt was eliminated and the share price has gone through the roof and we now have dividends, and capital for an ambitious expansion, and when interest rates rise one day we won't be nervous.
Once a week in the Herald in the business news the ratio of dividends/earnings is published, and that's where I got the figure from.

[Aaron]

Not sure what you are trying to say here but it looks wrong. If you are trying to reconcile the income with the operation cashflow then start with the income $47m plus the depreciation $170m then add and subtract operating and investing activities. I'm sure you will see a different picture..

You talking to me? I was ONLY using figures from the 2015 cashflow report, not smart enough to reconcile operating cashflow to net profit. There might even be a note in the accounts reconciling this but Paper Tiger is probably one of the few who bothers to read and understand it all.

[Aaron]

I would contend that they are not

"paying out 3-4x what they are earning"

Best Wishes
Paper Tiger

I agree they are paying out 5.5 times earnings (260mill/47mill)

[winner69]

You talking to me? I was ONLY using figures from the 2015 cashflow report, not smart enough to reconcile operating cashflow to net profit. There might even be a note in the accounts reconciling this but Paper Tiger is probably one of the few who bothers to read and understand it all.

Aaron - Note 16 on Page 48 of the Annual Report - RECONCILIATION OF PROFIT FOR THE YEAR TO NET CASH FLOWS FROM OPERATING ACTIVITIES

My view this is the most important part of any company accounts - the must read bit to see what really a going on. More important than all the pretty pictures and the warm fuzzy words bit.

Me - quick look at Income Statement and then the Cash Flow Statement and then concentrate on the reconciliation even the two. A few minutes and one has a decent view of what went on.

In F15 MRP generated $309m cash from operations, spent $103m on buying new stuff (investing cash flow) and paid $260m out in dividends. Increased borrowings by $65m to ensure they had a few million in the bank at all times.

[Aaron]

Thanks Winner69.
And that is why I may never become a successful investor. To lazy or stupid (or combination of both) to bother reading an annual report and fully understand what it is telling me.

[winner69]

Thanks Winner69.
And that is why I may never become a successful investor. To lazy or stupid (or combination of both) to bother reading an annual report and fully understand what it is telling me.

Would only take you a couple of minutes mate - worth a little effort