Zinzino (STO:ZZ B) Is Increasing Its Dividend To kr2.00

Zinzino AB (publ)'s (STO:ZZ B) dividend will be increasing to kr2.00 on 8th of June. This makes the dividend yield 4.9%, which is above the industry average.

See our latest analysis for Zinzino

Zinzino's Dividend Is Well Covered By Earnings

Impressive dividend yields are good, but this doesn't matter much if the payments can't be sustained. Before this announcement, Zinzino was paying out 78% of earnings, but a comparatively small 47% of free cash flows. This leaves plenty of cash for reinvestment into the business.

Earnings per share is forecast to rise by 11.3% over the next year. If the dividend continues growing along recent trends, we estimate the payout ratio could reach 90%, which is on the higher side, but certainly still feasible.

Zinzino Doesn't Have A Long Payment History

Zinzino's dividend has been pretty stable for a little while now, but we will continue to be cautious until it has been demonstrated for a few more years. The first annual payment during the last 8 years was kr0.10 in 2014, and the most recent fiscal year payment was kr2.00. This means that it has been growing its distributions at 45% per annum over that time. Zinzino has been growing its dividend quite rapidly, which is exciting. However, the short payment history makes us question whether this performance will persist across a full market cycle.

Zinzino's Dividend Might Lack Growth

The company's investors will be pleased to have been receiving dividend income for some time. Zinzino has seen EPS rising for the last five years, at 56% per annum. However, Zinzino isn't reinvesting a lot back into the business, so we wonder how quickly it will be able to grow in the future.

In Summary

In summary, while it's always good to see the dividend being raised, we don't think Zinzino's payments are rock solid. The company is generating plenty of cash, which could maintain the dividend for a while, but the track record hasn't been great. Overall, we don't think this company has the makings of a good income stock.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. For instance, we've picked out 1 warning sign for Zinzino that investors should take into consideration. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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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.