alvarez/E+ via Getty Images ZIM Integrated Shipping Services Ltd. ( ZIM ) is a shipping liner benefiting from record-high shipping rates and preparing to distribute its newfound riches to shareholders through a massive dividend. The company has also paid down nearly all of its debt and is signing new charters and focusing on its position as a “niche” shipper. Expanding Capacity and Looking to Capitalize on Future Global Growth
ZIM has chartered new vessels through two agreements so far in 2022. The first is for three 7,000 TEU dual-fuel LNG vessels which will be newbuilt and delivered in 2024. These come in addition to the ten 7,000 TEU and ten 15,000 TEU dual-fuel LNG vessels under construction for Seaspan who will charter them to ZIM. The second new charter agreement is with Navios Maritime Partners ( NMM ) and includes five smaller secondhand vessels for immediate delivery on 4.5-year charters alongside eight 5,300 TEU wide beam newbuilds for delivery between Q3 2023 and Q4 2024 on 5.3-year charters. These newbuilds are “expected to be deployed in trades between Asia and Africa.”
The fact that these new vessels are explicitly designated for routes between Asia and Africa is notable and reflects ZIM’s forward-thinking and “position as a global-niche operator .” The company has also recently expanded its ZMI Service between the Indian sub-continent and Israel, Turkey, and Northern Europe as well as expanding regional services in South America . Volume of loaded and unloaded cargo in seaborne trade in 2020, by continent (Statista) Though these regions are some of the smallest by shipping volume currently , ZIM appears to be positioning itself for growth as global trends shift. Africa’s population is expected to double by 2050 and the continent could very well see rapid economic growth akin to that East Asia has seen over the past century. If ZIM can gain an edge now in these emerging markets, the company could be very well positioned to capitalize on these trends over the long term. Though regardless of economic growth elsewhere, the development of East and South Asia is far from over and is expected to continue strongly for the next thirty years, driving demand.
Fortunately, ZIM is still paying attention to services out of Asia. The company notably re-upped its Operational Cooperation Agreement with the 2M Alliance—Maersk ( OTCPK:AMKBY ) and MSC—with amended terms that see ZIM operating its transpacific route from East Asia to the US West Coast outside of the agreement but continuing cooperation to the Gulf and East Coasts from Asia. ZIM is taking solo operation of two of six Asia to US East Coast routes under the new agreement and contributing three more vessels to the Gulf trade. Dividends Galore
ZIM’s new dividend policy , of paying out 20% of earnings each quarter with a higher “catch-up” dividend at the end of each year to bring the total payout to 30-50% of annual earnings promises to give the company a massive yield very shortly. Since the company has only paid one regular dividend of $2.50 in FY2021—the other dividend payment being a special dividend of $2.00—this year’s “catch-up” dividend can be expected to be extra high. With earnings expected to run around $38 per share for 2021, the total dividend payout this year should be somewhere between $11-19 per share. This means the payment following the company’s annual report—with a payout date sometime in April —could alone yield between 15 and 27 percent.
Even if ZIM’s earnings were to crater in the future, the projected dividends for this quarter alone are enough to beat the market. As with any extremely high dividend payout, there is a risk the company’s shares fall in line with the payout as the cash is leaving the balance sheet, though the good news with ZIM is that new cash flow will replace it almost as soon as the dividends deposit in shareholders’ accounts. All the same, ZIM’s earnings are expected to come down eventually from these sublime highs. Analyst estimates for 2023 have the company earning $11.46 per share. This would still give shareholders a yield of between 5 and 8 percent—which is still a more than respectable amount (plus that yield could be boosted by reinvesting those sky-high dividends for 2021 and 2022 in more shares). Valuation: All in Cash by Year’s End
ZIM is trading at an extraordinarily low forward price to earnings ratio of 1.83. The company currently has $2.8 billion of cash and short-term investments on the […]
source ZIM Integrated Shipping: Yielding Nearly 30% And Positioning Itself For The Future
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