Zinzino's (STO:ZZ B) Shareholders Will Receive A Bigger Dividend Than Last Year

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 makes the dividend yield about the same as the industry average at 2.4%.

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 52% 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 Future Dividend Projections Appear Well Covered By Earnings

We aren't too impressed by dividend yields unless they can be sustained over time. Before this announcement, Zinzino was paying out 81% of earnings, but a comparatively small 51% of free cash flows. Since the dividend is just paying out cash to shareholders, we care more about the cash payout ratio from which we can see plenty is being left over for reinvestment in the business.

Over the next year, EPS is forecast to expand by 72.4%. If the dividend continues along recent trends, we estimate the payout ratio will be 61%, which would make us comfortable with the sustainability of the dividend, despite the levels currently being quite high.

See our latest analysis for Zinzino

Zinzino Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. The dividend has gone from an annual total of SEK0.25 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 32% a year over that time. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

Zinzino Might Find It Hard To Grow Its Dividend

Investors who have held shares in the company for the past few years will be happy with the dividend income they have received. Zinzino has seen EPS rising for the last five years, at 72% per annum. Earnings per share is growing nicely, but the company is paying out most of its earnings as dividends. This might be sustainable, but we wonder why Zinzino is not retaining those earnings to reinvest in 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. With a reasonable track record and good earnings coverage, the payments look sustainable. The dividend looks okay, but there have been some issues in the past, so we would be a little bit cautious.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. As an example, we've identified 1 warning sign for Zinzino that you should be aware of before investing. 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.