Stock Analysis

Zimmer Biomet Holdings (NYSE:ZBH) Will Pay A Dividend Of $0.24

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NYSE:ZBH
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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. This means the annual payment will be 0.9% of the current stock price, which is lower than the industry average.

See our latest analysis for Zimmer Biomet Holdings

Zimmer Biomet Holdings' Earnings Easily Cover The Distributions

Even a low dividend yield can be attractive if it is sustained for years on end. The last dividend was quite easily covered by Zimmer Biomet Holdings' earnings. This indicates that quite a large proportion of earnings is being invested back into the business.

Over the next year, EPS is forecast to expand rapidly. If the dividend continues along recent trends, we estimate the payout ratio could reach 92%, which is on the higher side, but certainly feasible.

historic-dividend
NYSE:ZBH Historic Dividend August 29th 2022

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 $0.72 in 2012 to the most recent total annual payment of $0.96. This implies that the company grew its distributions at a yearly rate of about 2.9% over that duration. Although we can't deny that the dividend has been remarkably stable in the past, the growth has been pretty muted.

Dividend Growth Potential Is Shaky

The company's investors will be pleased to have been receiving dividend income for some time. However, things aren't all that rosy. Over the past five years, it looks as though Zimmer Biomet Holdings' EPS has declined at around 17% a year. Dividend payments are likely to come under some pressure unless EPS can pull out of the nosedive it is in. Over the next year, however, earnings are actually predicted to rise, but we would still be cautious until a track record of earnings growth can be built.

In Summary

In summary, we are pleased with the dividend remaining consistent, and we think there is a good chance of this continuing in the future. While the payments look sustainable for now, earnings have been shrinking so the dividend could come under pressure in the future. Taking all of this into consideration, the dividend looks viable moving forward, but investors should be mindful that the company has pushed the boundaries of sustainability in the past and may do so again.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. Still, investors need to consider a host of other factors, apart from dividend payments, when analysing a company. For example, we've picked out 3 warning signs for Zimmer Biomet Holdings that investors should know about before committing capital to this stock. Is Zimmer Biomet Holdings not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

What are the risks and opportunities for Zimmer Biomet Holdings?

Zimmer Biomet Holdings, Inc., together with its subsidiaries, operates in the musculoskeletal healthcare business in the Americas, Europe, the Middle East, Africa, and the Asia Pacific.

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Rewards

  • Earnings are forecast to grow 21.48% per year

Risks

  • Profit margins (4.1%) are lower than last year (11.7%)

  • Large one-off items impacting financial results

  • Has a high level of debt

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Zimmer Biomet Holdings

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