Meridian Energy just paid me $684!
Oct 20, 2019
I had a nice surprise on the 16th of October. I logged onto PocketSmith and saw that my bank account had an additional $684 in there. Nice! But why?
I’m a shareholder of Meridian Energy and twice a year they pay dividends, this $684 was my second dividend payout for the year. Back in April, they paid out $410, so a total of $1094 in 2019.
So, when people talk about “passive income” this is what it actually looks like. Money, deposited in my account, without me having to actually do anything except investing in a company and trusting that they will work hard on my behalf.
Meridian Energy is the only individual shares I own, the rest is in index funds (actually that’s a small lie, I also have $100 of Ryman), thankfully these individual shares are doing well. Investing in a single company is a risky proposition, all of my eggs are in one basket here, but in this case, it’s working out ok. I can’t claim any kudos here, it was due to blind luck and a smooth-talking Prime Minister that I bought them in the first place, back in 2013.
I must get excited (I DO get excited) each time I get a dividend because I’ve blogged about Meridian Energy a few times before:
Do it for the FREE sandwiches!
Meridian Energy Dividend Pay Day!
What’s up with Meridian Energy?
What does investing in the share market look like?
To help you understand what investing in the share market actually looks like in reality, I thought I’d break down this investment for you because it’s nice to see some actual numbers right?
I purchased these shares back in late 2013. The National Government were busy selling off the family china, aka state-owned enterprises and the idea was sold to the population as a chance for Mum and Dads to become share investors. We fitted the bill, parents of one, so without really knowing what we were doing, we signed up. And to give the Prime Minister at the time John Key credit, this did jump start my interest in investing and just generally paying more attention to money. We took a leap of faith and it continues to pay off for us.
In late 2013 we bought 6100 shares at a total cost of just over $9,000.
Today, in late 2019 we still own all 6100 shares and the value of them is approx $32,500.
In six years they have increased in value or shown a capital gain of about $23,500.
Also, during that time we have received dividend payouts into our bank account twice each year, totalling $5613 (after-tax).
Over this same period of time we have also received $1730 of ‘imputation credits’ - these are tax credits that we receive as well as our dividends and I claim these credits in my tax return.
Imputation credits (franking credits) lets shareholders receive tax credits with the dividends they receive, by allowing the company to pass on credits for the income tax it has already paid. Companies keep track of how much income tax they pay and can attach this as an imputation credit to the dividends they payout. The dividends are part of each shareholder’s income, but the imputation credit reduces their income tax liability. This allows the shareholders a credit for income tax the company has already paid, so company profits are not taxed twice.
(source: www.ird.govt.nz)
When I look at the tax return I have just received I can clearly see:
Income Tax Payable MINUS Imputation credits. It’s a real tax saving. This is what they looked like for 2019:
Too many numbers make you bored?
Here it all is in my Sharesight graph showing how things are looking as at 16 October 2019:
I use a freaking amazing FREE stock portfolio tracker, New Zealand company Sharesight to track how this company is performing. Goodness knows how, but it automatically imports all of my dividend payouts and updates my returns on a daily basis. So, I can see that my total return is sitting at 14.57%. It also shows how Meridian Energy is performing compared with the SmartShares NZ Top 50 ETF. It’s currently outperforming it which is fantastic.
Trying not to confuse you here BUT I also own the SmartShares NZ Top 50 ETF and that also has Meridian Energy in it - so I actually own them twice and will receive dividends from this fund in June and December. So, that’s something exciting to look forward to as well!
Meridian Energy do not have a dividend reinvestment plan, instead, they just payout into my bank account. So, it’s up to ME to use this money well. In this instance, when I received my $684 this week I immediately sent $600 off into a bank account waiting to be invested in my index fund investments (NZ Top 50, US500, NZ Property Fund), leaving the remaining $84 in our everyday account to be spent on boring things like bread and butter.
When my index funds pay dividends I never see this money in my account, I chose to reinvest any dividends to purchase more units in the fund. While I’m in a growth phase this is the far better option because there is a 100% chance that I won’t spend any money that I don’t receive!
In fact, I’ve just shamed MYSELF and have gone back and transferred the remaining $84 into my bank account earmarked for money that I need to invest. This darn blog is like my conscience!!!
The Proof!
I can now say, hand on heart I have reinvested all $684 of the dividend I received! Phew, that was close. This is a timely reminder JUST WHY investing should be automated, otherwise human nature gets in the way and while it may feel good in the short term to keep a little of that money back to treat myself or buy necessities, I’m really just shortchanging my future self, because just look at how far my investment has come in just six years. It’s proof that money invested today pays dividends in the future.
