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Email this4:45 pm
March 17, 2018
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I got an email today that Meridian is offering exclusively to members Series 23 shares with a minimum 6.5% dividend rate. Its available for TFSA, RRSP and RRIF and non registered. Anyone here buying into it ?
5:51 pm
March 15, 2019
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I could never figure out when you get your principal back. There is no fixed maturity date.
6:00 pm
March 17, 2018
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COIN said
I could never figure out when you get your principal back. There is no fixed maturity date.
Members can request to transfer their shares at any time. Meridian will attempt to facilitate a transfer by matching a Member looking to sell their shares (the seller) with a buyer from our waiting list. If you transfer your shares to another Member, you’ll get back your original purchased amount.
No redemptions are permitted until the fifth anniversary of the issue date (except upon death of the shareholder). The maximum redemptions in any fiscal year cannot exceed 10% of the total shares issued and outstanding shares at the end of the preceding calendar year. This is subject to Board approval and Applicable Law.
It doesn't look too good to me, since:
6.50% is the minimum dividend rate, which is subject to change after the initial 5 years, as outlined within the Offering Statement, and each five years thereafter. The annual dividend rate can be higher than the minimum dividend rate. Dividends (taxed as interest income) are not guaranteed to be declared annually and are non-cumulative.
7:56 pm
March 30, 2017
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Absolutely hate this type of advertising. ‘min 6.5% dividend rate’ only if the board approve and declare the dividend, what a joke,
It is essentially a ‘min 0%’…
9:41 pm
October 21, 2013
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It's a dividend, not a guarantee, and it depends on profitability. It would be the same if you bought bank shares instead. I don't think the banks show a projected rate, but they don't need to as people generally expect them to go up. From what I've seen, CUs generally meet their target. If I were considering buying these, I would appreciate knowing the target.
That said, I won't buy them. Too many if's. It's a long term investment, and I'm too old for it in my opinion. MIght be good forsomeone who wants an income stream that's a bit higher than GICs, is comfortable with a little extra risk, and feels positively about their CU.
5:17 am
March 17, 2018
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Loonie said
It's a dividend, not a guarantee, and it depends on profitability. It would be the same if you bought bank shares instead. I don't think the banks show a projected rate, but they don't need to as people generally expect them to go up. From what I've seen, CUs generally meet their target. If I were considering buying these, I would appreciate knowing the target.That said, I won't buy them. Too many if's. It's a long term investment, and I'm too old for it in my opinion. MIght be good forsomeone who wants an income stream that's a bit higher than GICs, is comfortable with a little extra risk, and feels positively about their CU.
All good points. I'm not that positive about Meridian since they are losing money on Motusbank, maybe @Doug can give us a profitability update.
2:39 pm
March 30, 2017
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Loonie said
It's a dividend, not a guarantee, and it depends on profitability. It would be the same if you bought bank shares instead.
Except bank shares are "real" dividends that are dividend tax credit eligible.
Any of these CU "dividends" are interest income. An interest income should be guaranteed and not "subject to board approval".
4:25 pm
October 21, 2013
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Yes, I know that, but decided not to mention it because it's irrelevant to your original complaint about how the rate was advertised.
The government determines what constitutes interest income, not the CU. Interest income is not necessarily guaranteed. It depends on the terms and conditions. If you don't like that, you'll have to take it up with regulators.
Market-linked "GICs", issued by both banks and CUs, also produce interest income, but it is rarely if ever guaranteed.
5:16 pm
April 6, 2013
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The dividend gross up and dividend tax credit are to account for the regular corporate income taxes or small business corporate income taxes the dividend payer has already paid on the funds for the dividend.
Credit unions don't pay regular or small business corporate taxes. So, no dividend gross up and no dividend tax credit.
10:39 am
March 30, 2017
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Norman1 said
Credit unions don't pay regular or small business corporate taxes. So, no dividend gross up and no dividend tax credit.
I learnt something new. 🙂
Does a CU pays any tax at all ?
7:23 am
April 6, 2013
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I've seen income taxes appear in the financial statements of credit unions. Not sure if that's because the credit union actually pays some income taxes or the credit union owns a subsidiary, like a brokerage, that does have to pay regular corporate taxes.
For sure, credit unions do have special deductions so that they don't pay as much income taxes as a regular corporation would. Credit unions are intended to be a non-profit. Any profits at the end of the year are to be allocated to members through share dividends or patronage rebates.
We looked into some details of credit union taxation a while ago.
7:13 pm
September 8, 2023
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I bit on these. Not for everybody, but the big Pro is the excellent minimum dividend of 6.5% for 5 years. I know dividends are paid at the discretion of the Board, but Meridian has never not paid a dividend. I own some of these from DUCA as well and they've also never missed a dividend. I think one missed dividend would kill any interest in these share offerings as the high dividend is really the only thing going for them.
Lots of Cons. No FSRA coverage, dividend is fully taxed as interest if not in a registered account and the liquidity is poor. Only redeemable after 5 years and even then Meridian only allows 10% of the total issued and outstanding shares to be redeemed in any given year. However, there is usually a substantial wait list for these shares and you can request Meridian transfer them to a buyer at any time. It can take them weeks, sometimes months, to do this though.
So if you have some room in your TFSA or RRSP, have zero need for the money in the short term, can stomach the lack of FSRA coverage and are prepared to be patient when you eventually transfer or redeem these things then take advantage of the high dividend. Otherwise don't bother with them.
Please write your comments in the forum.