What's up with Meridian Energy?

What's up with Meridian Energy?

What's up with Meridian Energy? Since I began investing in index funds I have been thinking of selling my shares in them because they are the only individual shares I own now. But then I procrastinated, then I got busy, then I got a dividend payout and then I actually took a much closer look at them because I realised that this has happened, a steady rise in their share price:

A steady rise in Meridian Energy’s share price.

When I last mentioned Meridian Energy (MEL) in a blog post I detailed what the company was all about, so check it out if you want to know more about them: Do it for the FREE sandwiches!

I also blogged about the dividends I receive here: Meridian Energy Dividend Pay Day!

Our one and only purchase of Meridian shares happened back in October 2013 when John Key and the National Government were busy partially privatising/selling off state-owned enterprises (Meridian still remains 51% owned by the government). They are New Zealand's largest renewable energy generator and I’m keen on being Green.

I paid $1.50 a share ($9,150 in total) back in Oct 2013 and the payment was in two instalments 18 months apart, during which time I got to collect dividends for the full amount which was a bit of a win.

As of Monday morning (14th Jan 2018), the share price is now $3.61 meaning my shares are worth $22,021 showing that if I sold today I’ve had a 140% increase in just over five years. During this time we have reliably received dividend payouts of roughly $1,000 (after tax) each year, it varies. I’ve reinvested probably about 95% of this money into my index funds, with just the odd wee spend up and for me these dividend payouts represent a couple of weeks pay a year that I don’t actually have to go out and work for.

In the last 12 months the share price has had a bumpy climb from $2.64 to $3.61 and when I enter it into my spreadsheet at the end of each month the change in value has been noticeable:

Meridian Energy’s bumpy climb.

When I read their annual report media release (oh yes I did) dated 22 August 2018 it said:

  • Has achieved its highest level of earnings since 2013

  • I’m paraphrasing here... “they didn’t have enough water in their dams, but then they did, which improved things a lot”

  • Their dividend was 1.5% higher

  • As a company, they are working smarter and greener internally and encouraging you and I do the same and are also growing their presence in Australia

Is this growth good?
I think it is good?

But, because I don’t own any other single stocks, in New Zealand I don’t have a point of reference other than my SmartShares NZ Top 50 (FNZ) index fund which over the last five years have returned 13.01% after taxes and charges.

Is THIS good?
I think it is good?

You would think that having owned these shares since 2013 I would be fully cognizant of every move the company is making, but alas no! I bought them because it sounded like a good idea, I liked Meridian Energy, I used them myself and I liked their green principles. I’ve kept a vague eye on any headline I see with them in it and an ear cocked when I hear “lake levels are low which has an impact on electricity generation”. But the reality is that I still have no idea of the internal workings of a company and still little interest in learning. But despite my lack of knowledge I still managed to make some money.

In trying to decide whether to finally sell them I began to research but finding information about them is hard work and no amount of googling has bought me much closer to working out exactly where they are headed as a company in the coming years and I won’t bore you with what I did find out. And then I listened to a good podcast the other day (21. Interview with Tim Brown from Infratil) where several references were made to Warren Buffet and the fact that he buys good companies and does not sell them and it helped me decide the following:

I would sell if I thought I bought the wrong thing, but I don’t think I did. It does me no harm to hold onto my shares in them, even though I also hold them in the NZ Top 50 (FNZ) index fund I’m in. My biggest concern is that I feel at risk having individual shares in just one company, but its good to remind myself that I also have shares in 550 other companies by way of the index funds I’m in (FNZ and USF), plus I own my own home and have no debt. So, in the grand scheme of things I’m very well diversified. Throughout the five years I’ve owned Meridian shares I’ve always thought that Meridian Energy to be a good company and I enjoy receiving my dividends twice a year. We all need a reliable power supplier and I’ve never had a power cut at my house, so they are clearly pretty good at what they do!

Therefore, the status quo remains and only hindsight will tell me if I have made the right decision today.

Happy Saving!


Thanks John C. Bogle for Making Investing Simple

Thanks John C. Bogle for Making Investing Simple

REVIEW: PocketSmith Part 2

REVIEW: PocketSmith Part 2