Meridian Class A 4% Interest | Meridian Credit Union | Discussion forum

1nt2Save said
I was sent a promotional e-mail from Meridian to be put on their waiting list for purchase of Class A shares (see link below). They claim to payout a dividend target of at least 4% and have for the last 5 years. It appears the payout date is yearly and has been Jan 21. With restrictions they say you can redeem your investment at any time. I was wondering if anyone here has tried investing with them and what has been your experience?

https://www.meridiancu.ca/Personal/Investing/Products-and-Account-Types/class-a-shares.aspx?utm_source=email&utm_medium=email&utm_campaign=Class-A-Shares_07MAY2020&spMailingID=5339750&spUserID=MjQ1MTYxMDY4MTM4S0&spJobID=1020336677&spReportId=MTAyMDMzNjY3NwS2  

I'm normally a fan of credit union investment shares as they notionally retain their par value at "maturity" (that is, in this context, when they can be redeemed) as there is no secondary market. That lack of a secondary market is a double-edged sword in that there is no liquidity should you need to redeem part of your shares early. They do say they'll try and find a buyer for your shares, but it's no guarantee. As well, one has to consider the risk/reward that the Canadian bank common and even preferred shares offer relative to Meridian. Why would I buy the common shares of a BBB-/BBB+-rated credit union paying 4% versus that of an A or AA rated bank paying 5-7%, with no upside? Heck, I could buy Home Capital Group (with no dividend) and Equitable Group (with a 2.3% dividend) at half their book values with a lot more potential upside when things normalize. Home Capital and Equitable are rated roughly the same as Meridian.

Meridian, meanwhile, has $90 million in members' capital tied up in regulatory deposits for its Motus Bank subsidiary, whose deposit gathering and mortgage originations have flatlined at ~$100 million or so. Their dream of attempting to catch Alterna Bank, seven or eight times its size, is just that...a pipe dream. They've basically got now work on trying to grow in the face of a public backlash, and retain their mortgage and deposit books. Plus, I just noticed that Meridian quietly raised $75 million last year and $50 million in Q1 2020 from a wholly-owned affiliate of the Caisse de depot de placements du Quebec in subordinated indebtedness. They rank below that of Meridian deposits, but, crucially, they rank above that of Meridian member and investment shares. In short, Meridian is levering up.

So, pass.

Cheers,
Doug