Doing the numbers

Mighty River Power forecasts NZ12c a share dividend for this year, rising to 13C a share next year; dividend yield for next year 4.6%-5.5% depending on share price

5th Apr 13, 3:12pm by David Hargreaves

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The soon-to-be NZX-listed Mighty River Power is forecasting after-tax earnings for the June 2013 year of NZ$94.8 million, rising to NZ$160.4 million in 2014.

Of key interest to would-be investors is the forecast for a full-year dividend of NZ13c a share in 2014.

The company has already paid a the Government a dividend for the first half of the current year, but is projecting a full-year payout this year of NZ12c a share.

Depending on what the final price is for the share offer, next year's dividend payout would give an implied dividend yield of 4.6%-5.5%, which compares reasonably well with current bank term deposit rates of around 4%.

Contact Energy, which was also formally Government-owned but was floated off by the previous National Government is at current share price levels yielding about 4.2%

Mighty River recently changed its dividend policy so that it now targets a payout of between 90% and 110% of profits. Next year's projected dividend will take the company close to that maximum with a projected 107% ratio.

And while that might sound confusing, the bald profit figures don't give a whole picture of how much cash the business actually generates.

For example the company is projecting that "net cash" provided by operating activities will be NZ$267.3 million in the current year and NZ$327.9 million in 2014.

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8 Comments

by Wolly | 5th Apr 13, 3:36pm 1365129415

Expect a carbon copy of Contact Energy ....no real growth in share value...big fat rise in bosses salaries and directors fat fees...

Why would you risk it...for maybe a 5% div...taxable...and also most certainly at the mercy of govt manipulation...The promise of share dilution at govt behest whenever they want more cash....

by Basel Brush III | 5th Apr 13, 9:02pm 1365148966

What are the price move pressures?

1. The institutions will be light on float and will have to kick in for some index balancing.

2. The 2 year threshhold for 1:25 bonus will keep most of the shares off market.

3. Price will likely fall below the issue within six months. Time to buy if you must.

Yes I have registered but will not buy in as the use of the cash means I would get some ( perhaps less than half of what I would apply for) and have most of the dosh returned.

How many are like me who do not want less than $20k for starters? Instead trading Contact against the MRP moves could be beneficial.

by KevinR | 6th Apr 13, 7:20pm 1365229256

I have been reading a lot lately on solar.

I also see electricity becoming to expensive for Joe Kiwi Public at least for the next 3 to 5 years.

If I take an investment of say $5,000-00 I believe you can get a better return than 5% by putting it into roof top solar.

You would need to own your own property and have no intention of moving in the forseable future.

Having a heating system that heated your water is the only exception. This could be a log burnner with wetback or a simple renewable energy generator ie water or wind

regards

KevinR

by powerdownkiwi | 6th Apr 13, 8:00pm 1365231633

KevinR - the graph on solar-return has already crossed over grid-power. Conventional wisdom says $3/Watt is crossover - we're down to $1, and in bulk down to 65c.

This would be like Telecom and NZ Post - except for the depletion of fossil fuels. Conventional wisdom then would say that both solar and big-hydro would be more profitable, via being more sought-after.

But conventional wisdom forgets that the current understanding of wealth is just our ability to buy bits of the planet, supplied by said energy.

So the fiscal system is in terminal trouble, as are those who expect a return (more ability to buy bits of the planet) on 'investment'. That idea that money could make money, failed to ascertain what did the underwriting.

So you're better off being off the grid (out of the clutches) and self-sufficient in energy. If you think you'll have to move, take it with you. My whole system - everything in the house (lights, wires, switches) batteries, micro-hydro, solar, generator - has only cost your 5g's.

by powerdownkiwi | 6th Apr 13, 8:07pm 1365232025

Kimy - the cost has already crossed - see my comment above.

There is an argument for what you suggest - our hydro lakes are the best, most sustainable, least pollutive battery ever devised.

It's still a lot cheaper off-grid, though, especially if you are building from scratch. We're coming up 10 years without a power-bill. $5,000 total outlay, and about $3,000 total in fuel through the generator (started more, getting less).

Hard to beat.

by KevinR | 6th Apr 13, 8:40pm 1365234043

Hi powerdownkiwi,

Thank you for your support, are you running through an inverter from batteries and only needing to start your generator after long periods of low or no sun, and to run high use items such as electric welders,

regards

KevinR

by powerdownkiwi | 7th Apr 13, 8:55am 1365281725

Kevin - I have inverters, but don't use them. House is 12 volt, straight from the batteries. We have micro-hydro (1 litre/sec @ 23metres head - pelton wheel/Gentle Annie) which complements solar very well - no rain usually means lots of sun, and vicky-verka.

Use the 'genny' for washing machine (I'm working on that) and for power-tools. One thing with battery-life is to make sure you don't dip too deep into them - so we do the grunt with the 'genny'. Biggest issue is start-up draw from induction motors - they will run if they can start, as a rule.

We ran on one 50watt panel for years, now rolling in luxury with 200watts.

http://www.radionz.co.nz/national/programmes/saturday/20130330

The David Trubridge interview is a goodie.

He sounds very parallel to us - interesting how cruising yachties seem to got the idea of finite resources, self-sufficiency, simple tech.

by KevinR | 6th Apr 13, 9:09pm 1365235753

Hi Kimmy

I believe the GOVT will be reluctant to look at anything at the moment, just remember they need power consumption to go up, not go down, and with price increases coming on all the time, Joe Public are looking for ways to reduce their consumption and or costs. In 5 years or so if the smelter should go without a replacement then we may see a small reduction, but don't hold your breath as there is a lot of water to flow under the bridge between now and then

regards

KevinR