Is ZIM spectacular dividend safe? I am trying to make sense of the financial 2021 financial results versus 2019 financial results.
For 2019, the Shanghai Containerized Freight Index (SCFI) average rate per TEU was $822, for 2021 the average rate was $3,833. For 2019, ZIM's vessels carried 2,812,000 TEU at an average freight rate of $1,007. For 2021, ZIM's vessels carried 3,481,000 TEU (23% increase over 2019) at an average freight rate of $2,786 (176% increase over 2019). For FY 2019, revenue was $3.3 Billion, for 2021 revenue was $10.7 Billion (225% increase over 2019).
ZIM's revenue is tied to freight rates just like revenue from oil companies is a function of the world price for a barrel of oil. So the question is what will happen to ZIM's revenue when or if freight rates drop to level approaching 2019?
What if ZIM's net income is cut by a third what would happen to the dividend yield? FY 2021 net income would have been $1,550,000,000, instead of $4,649,000,000. ZIM's stated dividend policy is to pay between 30% to 50% of net income. 50% of $1,550,000,000 is $775,000,000. The number of shares is 119,743,188. ZIM would pay $6.47 per share in dividend for a yield of 15.4% ($6.47 / $42). At 30%, the dividend yield would be 9.2%. At $42 the market cap is $5.06 Billion even with net income is cut by a third ($1.55 Billion) ZIM's valuation is cheap.
Future growth will come from the new vessels ZIM will take possession in 2023 and 2024.
https://www.statista.com/statistics/1309698/monthly-china-shanghai-container-freight-rate-index/#:~:text=Monthly%20Chinese%20Shanghai%20container%20freight%20rate%20index%202019%2D2022&text=Costs%20of%20shipping%20freight%20from,value%20of%20some%204%2C434%20points.