Only 3 Days Left Before Meridian Energy Limited (NZE:MEL) Will Start Trading Ex-Dividend, Should Investors Buy?

By
Simply Wall St
Published
March 24, 2018
NZSE:MEL

Investors who want to cash in on Meridian Energy Limited's (NZSE:MEL) upcoming dividend of NZ$0.09 per share have only 3 days left to buy the shares before its ex-dividend date, 28 March 2018, in time for dividends payable on the 17 April 2018. Investors looking for higher income-generating stocks to add to their portfolio should keep reading, as I examine Meridian Energy's latest financial data to analyse its dividend characteristics. See our latest analysis for Meridian Energy

5 checks you should use to assess a dividend stock

When researching a dividend stock, I always follow the following screening criteria:

  • Is its annual yield among the top 25% of dividend-paying companies?
  • Has its dividend been stable over the past (i.e. no missed payments or significant payout cuts)?
  • Has the amount of dividend per share grown over the past?
  • Is is able to pay the current rate of dividends from its earnings?
  • Will it have the ability to keep paying its dividends going forward?

NZSE:MEL Historical Dividend Yield Mar 24th 18
NZSE:MEL Historical Dividend Yield Mar 24th 18

How does Meridian Energy fare?

The current trailing twelve-month payout ratio for MEL is 199.38%, meaning the dividend is not sufficiently covered by its earnings. In the near future, analysts are predicting a lower payout ratio of 165.32%, leading to a dividend yield of 6.38%. However, EPS should increase to NZ$0.09, meaning that the lower payout ratio does not necessarily implicate a lower dividend payment. If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you're eyeing out is reliable in its payments. Unfortunately, it is really too early to view Meridian Energy as a dividend investment. It has only been consistently paying dividends for 3 years, however, standard practice for reliable payers is to look for a 10-year minimum track record. Relative to peers, Meridian Energy generates a yield of 4.81%, which is high for Renewable Energy stocks but still below the market's top dividend payers.

Next Steps:

After digging a little deeper into Meridian Energy's yield, it's easy to see why you should be cautious investing in the company just for the dividend. On the other hand, if you are not strictly just a dividend investor, the stock could still be offering some interesting investment opportunities. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. I've put together three essential aspects you should further research:

  1. Future Outlook: What are well-informed industry analysts predicting for MEL’s future growth? Take a look at our free research report of analyst consensus for MEL’s outlook.
  2. Valuation: What is MEL worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether MEL is currently mispriced by the market.
  3. Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.


Simply Wall St character - Warren

Simply Wall St

Simply Wall St is a financial technology startup focused on providing unbiased, high-quality research coverage on every listed company in the world. Our research team consists of equity analysts with a public, market-beating track record. Learn more about the team behind Simply Wall St.