Zinzino (STO:ZZ B) Has Announced That It Will Be Increasing Its Dividend To SEK4.00

The board of Zinzino AB (publ) (STO:ZZ B) has announced that it will be paying its dividend of SEK4.00 on the 5th of June, an increased payment from last year's comparable dividend. This takes the annual payment to 2.8% of the current stock price, which is about average for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Zinzino's stock price has increased by 46% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

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Zinzino's Payment Could Potentially Have Solid Earnings Coverage

We like to see a healthy dividend yield, but that is only helpful to us if the payment can continue. The last payment made up 81% of earnings, but cash flows were much higher. In general, cash flows are more important than earnings, so we are comfortable that the dividend will be sustainable going forward, especially with so much cash left over for reinvestment.

Over the next year, EPS is forecast to expand by 72.4%. Assuming the dividend continues along the course it has been charting recently, our estimates show the payout ratio being 61% which brings it into quite a comfortable range.

Check out our latest analysis for Zinzino

Zinzino Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of SEK0.10 in 2015 to the most recent total annual payment of SEK4.00. This works out to be a compound annual growth rate (CAGR) of approximately 45% a year over that time. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Zinzino's Dividend Might Lack Growth

Investors could be attracted to the stock based on the quality of its payment history. We are encouraged to see that Zinzino has grown earnings per share at 72% per year over the past five years. EPS is growing rapidly, although the company is also paying out a large portion of its profits as dividends. If earnings keep growing, the dividend may be sustainable, but generally we'd prefer to see a fast growing company reinvest in further growth.

Our Thoughts On Zinzino's Dividend

In summary, it's great to see that the company can raise the dividend and keep it in a sustainable range. The payments look pretty sustainable with good earnings coverage and a reasonable track record. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. However, there are other things to consider for investors when analysing stock performance. For example, we've picked out 1 warning sign for Zinzino that investors should know about before committing capital to this stock. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.