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华尔街日报Here's Why We're Wary Of Buying Zoom's (TSE:6694) For Its Upcoming Dividend
Zoom Corporation (TSE:6694) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. The ex-dividend date is important as the process of settlement involves at least two full business days. So if you miss that date, you would not show up on the company's books on the record date. In other words, investors can purchase Zoom's shares before the 29th of December in order to be eligible for the dividend, which will be paid on the 30th of March.
The company's upcoming dividend is JP¥32.00 a share, following on from the last 12 months, when the company distributed a total of JP¥32.00 per share to shareholders. Based on the last year's worth of payments, Zoom stock has a trailing yield of around 4.8% on the current share price of JP¥669.00. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to investigate whether Zoom can afford its dividend, and if the dividend could grow.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Zoom paid a dividend last year despite being unprofitable. This might be a one-off event, but it's not a sustainable state of affairs in the long run. Given that the company reported a loss last year, we now need to see if it generated enough free cash flow to fund the dividend. If cash earnings don't cover the dividend, the company would have to pay dividends out of cash in the bank, or by borrowing money, neither of which is long-term sustainable. What's good is that dividends were well covered by free cash flow, with the company paying out 24% of its cash flow last year.
See our latest analysis for Zoom
Click here to see how much of its profit Zoom paid out over the last 12 months.
Have Earnings And Dividends Been Growing?
Companies with falling earnings are riskier for dividend shareholders. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Zoom was unprofitable last year and, unfortunately, the general trend suggests its earnings have been in decline over the last five years, making us wonder if the dividend is sustainable at all.
Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. Since the start of our data, nine years ago, Zoom has lifted its dividend by approximately 7.6% a year on average.
Remember, you can always get a snapshot of Zoom's financial health, by checking our visualisation of its financial health, here.
The Bottom Line
Has Zoom got what it takes to maintain its dividend payments? First, it's not great to see the company paying a dividend despite being loss-making over the last year. On the plus side, the dividend was covered by free cash flow." With the way things are shaping up from a dividend perspective, we'd be inclined to steer clear of Zoom.
Having said that, if you're looking at this stock without much concern for the dividend, you should still be familiar of the risks involved with Zoom. Be aware that Zoom is showing 4 warning signs in our investment analysis, and 2 of those don't sit too well with us...
Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are 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.