when you see a company with a hundred and ten percent dividend yield it makes you wonder is
this an epic dividend or a dividend trap buy a popular request we're going to dive into the stock
Zim it's a shipping cargo company based out of Israel and while it was founded in the year 1945
interestingly enough it only went public on the stock market in 2021. now on this one I'm gonna
remain neutral I'm going to give you the facts I'm going to show you the reports it's up to
you to be the judge if you like this stock or Not by the way if you like investing personal finance
and dividends consider subscribing for more first thing we need to look at is how Zim has been able
to afford this incredible dividend rate looking right here on the dividend tracker it's pretty
darn sexy to look at 110 percent dividend yield and in fact this April they paid on a 6.40 per
share dividend but that's the first thing we need to talk about it's going to hurt some investors
that bought into them because a lot of people were talking about it a high 100 percent even 90
dividend yield is quite attractive so a lot of people went over they went in and they bought into
Zim but let's take a look at the average price if we go over to Seeking Alpha one of my favorite
investing tools and we pull up Zim you're going to see that when they paid out their dividend on
April 4th a sharp decline in the stock price now that is typical when they pay on a dividend that
the stock price will come down but I'd like to look for companies that kind of maintain
a fair and reasonable stock price after they pay their dividend that tells me that there's a lot of
confidence in the company that people aren't just chasing the dividend and then pulling out after
the dividend is paid and I want to make sure that they have enough cash to continue to grow their
operation so that is a little bit of concern but if we look back here and actually let's go to year
to date ah heck let's go to the one year you can kind of see how this has been trending but let's
say you bought in at right around this point and you're looking at all these different stock prices
and let's say we're going to average about 21 a share that's what you bought in on Zim and you
only bought five shares of Zen so I'm gonna pull up my Excel document we're to take a little peek
about what this looks like so if your average price is 21 dollars per share that's what that
indicates right there and then we bought five shares of Zim we would have paid a total of a
hundred and five dollars now the goal with most stock purchases is you want the the share price
to go up over time and then your 105 dollars turns into so much more but then of course this
one pays an incredible dividend so what you could do is reinvest the dividend back into buying more
shares of Zim or you cannot reinvest the dividends keep that money and go buy a beer with it it's
your call but then we plug in that six dollar and forty cents last dividend that they just paid out
so if you bought five shares of Zim in the last couple months that means you have a total of 137
dollars in that case that's if the price remains at twenty one dollars you get the 640 dividend
you have about 137 dollars of value all right but that's not what happened in fact if we look over
at Seeking Alpha you can see the current price of Zim right now as of the recording this video is
seventeen dollars and three cents per share that's as a result of that stock price coming going down
after the dividend was paid so if we plug in 1703 times five dollars per share your value is now
only at 85 dollars but we'll take that eighty five dollars we'll add the dividend back in that means
the total value is sitting at 117.15 so that's the one thing if you bought this particular stock at
that high or at that average price of about twenty one dollars a share you're not looking good even
after that amazing dividend and that's something as investors we should keep our eye on even though
something pays a great dividend keep an eye on the overall facts again I'm not saying this is
a bad company in fact we're about to dig into their financials so stay tuned in just a minute
for that but when it comes down to I'm going to chase this now because everybody's hyping it
up big dividend is getting paid are you actually getting the payoff in this case if you would have
taken this strategy you're not getting a payoff because it only grew to 117.15 if we scroll back
even further it's actually not a better picture coming back here to 2021 it actually peaked all
the way up here here you can see you know even if you average the 67 per share stock price that
hurts even more even considering all the dividends paid but let's hop back to the dividend tracker
and it has some very good interesting information that we can then look at another report that I'll
share with you in just a second so right here on the right hand side you see that free cash flow
take a look at that now that tells us a lot about maybe why they're paying such a great dividend
and this is a good thing this is a good thing in the case of Zim the free cash is going up look at
that in 2021 and then in 2022 what a significant increase in free cash so they have all this money
coming in they're making all this profit they're making all this revenue and they're passing it on
to the investors in the form of a dividend in that case that's kind of awesome and if you look here
at the dividend payout ratio that is a percentage of their profits paid out in the form of dividends
we want to see that well below 100 percent they're only paying out 44.1 percent in the case of their
payout for the dividend now remember if they're paying 100 or more they're actually paying out
all of their profit and maybe even tapping into their cash reserves to pay on dividends in this
case according to the dividend tracker that's not the case so what caused this Sudden Rush of cash
well a couple things anything that has launched in 2021 I now look at with a magnifying glass and
the reason for that is in 2021 post-pandemic we have a lot of stimulus money flowing in we have
a lot of companies going public there's a lot of demand there's a lot of push and all of a sudden
everybody was just seeming to be flushed with cash if you remember the days of GameStop AMC
let me learn the fact that Robin Hood coinbase and of course Zim launches a stock in that year
it's always good to see are they just doing it because it was a hype at that time and now they
got to make up and actually show if they have what it takes to survive a recessionary period
or even just a boring period that's something we got to keep our eye on so let me show you this
very interesting report let me introduce you to something called the world container Index this
is the cost of containers basically for shipping look up here even in May of 2022 what a difference
that is at seven thousand seven hundred and twenty eight dollars on the world container
index now dropping all the way down here to one thousand seven hundred and ten dollars what a
significant difference and what that means is that Zim is going to have to be very careful
because the profits and the revenue that they were seeing which I'll show you in just a second
will not be as strong as it was in 2021 and 2022. so remember how like people wanted new cars and
people wanted used cars and people wanted supplies to build homes and people just wanted like toilet
paper well you couldn't get anything because the shipping took forever and on top of the fact that
the shipping took forever there was just a demand and the supply didn't actually meet the demand
so things were crazy so as a result there was a significant push on shipping companies to deliver
deliver and they had to deliver much quicker so thanks to them they're able to take their shipping
services and go absolutely crazy and make a ton of money but here's where things get tough now
that things are settling down now that the man's coming back down and leveling with Supply there's
not as much push for that accelerated shipment so one thing you should keep an eye on if you're
interested in Zim or you're an investor in Zim is how they're going to react to these rates as
things go down as Revenue settles down how are they going to hit potentially a net loss and
deal with that net loss or just in general less Revenue hopping over to Seeking Alpha again I've
mentioned it before one of my favorite absolute favorite investment research tools if you come
up here to financials and we click on that that's going to give us a little bit of a better example
of what's actually happening here we're going to start with their income statement I'm going
to leave it quarterly but one thing that I'd like to look for is increase in revenue and increase
in overall profit but this is where things get interesting for them because look at this the
revenues are actually going up keeping in mind the world container index 1.0 1.3 and then coming all
the way back up here in September of 2022 to 3.2 but we'll see that in December 2022 it dropped
back down to 2.1 could it be going back down here into maybe even potentially right after
the pandemic or pre-pandemic and if so something to keep your eye on same thing with the profit as
profit goes down let's say profit dips back down here to June of 2020. so if that happens at only
171 or let's say they were doing good pre-pandemic and they were only making maybe 800 or 1.3 million
dollars that is a big difference in profit from the 2.1 and the 1.9 under operating income as well
something to keep an eye on so as we get future quarterly reports and I would really look into
you know quarter one and Quarter Two of 2023 I think these next two quarters as Zim reports
their revenue their operating income and their net profit that's what I'm going to be zooming in on
to see are they able to maintain their success despite a little bit of a cooling in the market
the next thing we can look at is the balance sheet right up here it's the second option under
financials I will tell you right off the bat not to waste your time their balance sheet looks fine
so that means assets always should be higher than liabilities liabilities is like our personal debt
so if you sell everything will you still have extra cash left over in the case of Zim they
would they sell everything satisfy all their debt they'll still have cash on hand that's resilient
that's a good sign of a good company the last thing we can look at is the cash flow and this
is also very interesting just because we need to look at what's happening to net income and this is
what I was mentioning earlier so we're looking at the container index container index is going down
demand is Cooling and as a result look at their net income so it's looking great it's scaling
up as I mentioned as a result of the demand that happened in 2021 but now down quite significantly
in their last quarterly report of December 2022. take a look at that 414 compared to September at
1.1 compared to December of the prior year 1.7 in net income that's what's going to really challenge
their dividend in the future now they can continue to try to pay high but then we need to keep an eye
on their dividend payout ratio are they going to try to continue to attract investors as a result
of a high dividend in that case they're going to have to tap into their balance sheet and pay out
of their cash reserves not a good sign that would be a red flag another thing you could also do is
go over to charting by the way it dropped now to 16.96 as of the recording of this video which is
on April 10th of 2023 but regardless let's go to charting here another thing you can do of course
comparing to the S P 500 probably isn't a fair thing I'm going to get a total return so that
way we can factor in the dividends so Total return looks like this and I'm going to add a comparison
of s BLK another dividend stock that I mentioned that's very similar to Zim earlier on the channel
you can go check out that video after this one if you'd like to so you can see Star bulk is actually
kind of trailing with the S P 500 the total stock market of the top 500 companies that's indicated
by by this purple line S P 500 is the blue line and Zim is the orange line so we can see that you
know as a result of right around August it's been kind of trailing off and slipping away from The
Benchmark of its I would say it's competitor as well as the s p 500. let's go back over the last
three years just to get a little bit more scope and you can see it was doing great back when I
said it was back in the early part of 2022 and the late part of 2021 but then of course right
here is that inflection point and we're going to have to see what happens to this thing over the
long period of time in the short term the thing looks great in the long term with the dividend
that's what I want to keep my eye on let's start a conversation down in the comments below and
by the way if you want to see how I actually analyze stocks before I buy them there are 10
steps I look at check out all 10 steps in this video here and we'll see you on the next video