ZIM Dividend History: A Worthy Investment?
|Zim Dividend History: ZIM has paid excellent dividends in the last year. A dividend of $17 in March 2022 stands out. Currently, ZIM has a dividend yield of 46%, with an annual dividend payout of $19.|
High dividend stocks are mostly in trouble for one or more reasons. A high yield indicates that the company is going through deteriorating fundamentals and is using dividend payout to attract investors. But there are very few companies with rising EBITDA, rising revenue, rising dividend, and decreasing P/E ratio every quarter. That sounds too good to believe.
ZIM Integrated Shipping Services (NYSE: ZIM) is one such gem. It has been in operation since 1945 but was not profitable up till recently in 2019. But tables have turned around quickly for the company. ZIM came up with IPO in January 2021 and got listed on NYSE on 29TH January 2021 at a share price of $12.05. Based on strong fundamentals, the share price soon started the upward journey and touched a price of $90 by March 2022. But since then, it has been a dismal performance and the price continues to tumble on the fears of an impending recession.
In this article, we will talk about ZIM Integrated from all perspectives, with a primary focus on dividend payout, and try to figure out whether it is a worthy long-term investment or not.
ZIM Integrated Dividend History
The table below depicts the dividend payment history of the company
ZIM has paid excellent dividends in the last year. A dividend of $17 in March 2022 stands out. Currently, ZIM has a dividend yield of 46%, with an annual dividend payout of $19. The stock is currently trading at $24.87 which makes the above-given dividends even more attractive.
Zim Dividend History: Reasons Behind Strong Dividends
Let us look at some of the company’s fundamentals to deduce the reasons for such strong dividends from the company. It will also help us to predict future dividends.
- Cash is the king in ZIM. The company had $946.8 million of cash at end of the last quarter. It also has $3 billion of bank deposits versus lease liabilities of $4.3 billion. If we include, bank deposits in the net cash positions, $3.9 billion represents more than 90% of the market cap of the company.
- ZIM paid $2.4 billion in the form of dividends in the latest quarter and still is left with $743 million in free cash that it used to pay down the debt. As a result, the leverage ratio is virtually non-existent for the company.
- At the earnings conference of Q2 FY 2022-23, management affirmed full-year guidance and called for $6.7 billion in EBIT. It literally means that it will earn more income than its present market cap of $4 billion.
Zim Dividend History: ZIM Future Dividend Forecast
At the Q2 earnings call, ZIM CEO Eli Glickman made a number of important announcements. Along with reaffirming the full-year guidance, the CEO also raised the quarterly dividend payout from 20% to 30% of quarterly net income.
That news is very positive for investors. The main point is that it is capped with the quarterly net income, and hence investors will not only gain with the share price appreciation while net income rises, but they will also have a more steady income in form of dividends with every good quarterly result.
Zim Dividend History: Dividend Payout in Respect to Company’s Earnings
It is good that ZIM Integrated has paid a handsome dividend, but it is due to its solid earnings. The table below shows the earnings in previous quarters since listing.
The company has always outperformed the estimates in the previous quarter and an EPS of more than 14 in March 2022 is the reason for the increased dividend of $17 in the same quarter. In the recent quarter, although EPS is a bit below the forecast, it is still pretty good in comparison to the overall market and that’s why the company has increased the dividend from $2.85 to $4.75 in the latest quarter.
Comparison With the Peers
Let us see where ZIM Integrated stands in comparison to its peers
|Market Cap||Dividend Yield||Last Dividend||Annual Dividend|
|ZIM Integrated||$4 Billion||46.28%||$4.75||$19|
|Euronav NV||$3.84 Billion Euro||0.12%||$0.03||$0.12|
ZIM Integrated clearly stands out in terms of dividend payout as well as yield with respect to its peers.
Why Stock Price is Falling and How Will it Impact Dividend Payout
All things look good for ZIM, its dividend payout, and its revenue is increasing coupled with an increasing profit, but the share price is falling since March 2022. The price touched $90 in March 2022 and has been continuously tumbling since then, making a low of $24.87 (as of 23.09.2022). There has been a 55% fall in the last year. The reasons for the fall in share price are listed below: –
- There is a belief around the world that a global recession is impending. Last week, FedEx warned investors about below-par results due to a decrease in shipping volume and increased costs. ZIM Integrated is also a sea shipping company, and recession is likely to impact the shipping volume of the company hence investors believe that going forward in the year 2023 and onwards, the revenue and EBIT may suffer for ZIM Integrated.
- Last month Ford Motors CEO highlighted the issues in the supply chain leading to an increase in the cost and delivery time of the products. This has led them to declare that they were behind the production target. A smooth supply chain is very important for good shipping volume. Analysts predict that supply chain issues can hamper the business volume of ZIM Integrated and hence leading to a decrease in the revenue and profitability of the company.
- A large part of the increased revenue is due to the fact that shipping charges are at a record high. During Covid time, the shipping charges were very low, but since 2021, charges are increasing and it has helped to boost the revenue of ZIM Integrated. The global freight charges have touched $10,400 in September 2021. In July 2022, the global freight rate index stood at more than $6500. Going forward, investors believe that these high global freight rates will subside, affecting the revenue of the company.
Does Dividend Payout Make ZIM a Buy?
The fact is that it is difficult to find a company like ZIM Integrated. The company has taken all the steps to pay a solid dividend to shareholders by pegging it against the EPS in every quarter. The stock trades at only 0.44 times its 2023 projected revenue, which makes it one of the cheapest stocks available on exchanges. In addition to the dividend payout, the company’s long-term debt is almost nil in comparison to its cash flow.
There is a probability of global recession in the coming months and the freight volume is likely to be impacted by it. But it will be a test for the management to come out positive from it. ZIM is a buy from every perspective and every long-term investor should own it, even if in small quantity not for its dividend payout, but also to witness its growth story.
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