Zimmer Biomet Holdings (NYSE:ZBH) Is Due To Pay A Dividend Of $0.24

The board of Zimmer Biomet Holdings, Inc. (NYSE:ZBH) has announced that it will pay a dividend on the 31st of October, with investors receiving $0.24 per share. The dividend yield is 0.8% based on this payment, which is a little bit low compared to the other companies in the industry.

Check out our latest analysis for Zimmer Biomet Holdings

Zimmer Biomet Holdings' Dividend Is Well Covered By Earnings

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. However, prior to this announcement, Zimmer Biomet Holdings' dividend was comfortably covered by both cash flow and earnings. As a result, a large proportion of what it earned was being reinvested back into the business.

The next year is set to see EPS grow by 42.0%. If the dividend continues along recent trends, we estimate the payout ratio will be 14%, which is in the range that makes us comfortable with the sustainability of the dividend.

Zimmer Biomet Holdings Has A Solid Track Record

Even over a long history of paying dividends, the company's distributions have been remarkably stable. The dividend has gone from an annual total of $0.80 in 2014 to the most recent total annual payment of $0.96. This works out to be a compound annual growth rate (CAGR) of approximately 1.8% a year over that time. While the consistency in the dividend payments is impressive, we think the relatively slow rate of growth is less attractive.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Zimmer Biomet Holdings has seen EPS rising for the last five years, at 28% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

Zimmer Biomet Holdings Looks Like A Great Dividend Stock

Overall, we like to see the dividend staying consistent, and we think Zimmer Biomet Holdings might even raise payments in the future. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

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. Taking the debate a bit further, we've identified 2 warning signs for Zimmer Biomet Holdings that investors need to be conscious of moving forward. 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.