Shipping company
Zim
-4.48%
closure:0
opening:51.18
High:51.48
low:48.02
cycle:—
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of Idan Ofer, under the management of Eli Glickman reported in the second quarter on revenues of 3.43 billion dollars, which were below the expectation of 3.63 billion dollars. In the bottom line, the company reported a profit per share of $11.07, well below analysts’ expectations of $12.84 per share (net profit of $1.34 billion in the quarter) – and as a result the stock fell by 6% that day. Surprisingly, Betzim did not anticipate the drop in transportation prices and the company’s president and CEO Eli Glickman even said in an interview to Bizportal that “it is possible that transportation prices will continue to fall” but he pledged that “this year’s results will be better than last year, which was also a record year.”
But Zim has something to her credit that not many companies can boast of: Zim distributed 15 times the entire amount she raised in the IPO, and in a very short time – within a year and a half of the IPO. Zim, which has already been bankrupt twice and recorded many years of losses, enjoyed and still enjoys greatly the surge in transport prices in the world. Zim will distribute 30% of the net profit on the results of the second quarter of 2022 in the amount of approximately $571 million, $4.75 per share.
Most of the dividend that was distributed was last March 22, where Zim distributed a huge dividend of 17 dollars per share. The stock was at the center of things, when transportation prices were at their peak – 7 times what they were before the corona virus, which eventually seeped into the skyrocketing profits of the shipping company, and the stock jumped 753% from the offering to a market value of 10 billion dollars (and has since dropped to 5.8 billion, including that dividend).
So yes, Zim returns a lot of value to investors in high dividend payments. There are many who bought the stock at the beginning of its journey on the American stock exchange, and could have returned the investment only from dividends – 29.1 dollars (including the upcoming payment) per share have been distributed so far to Zim investors from its issuance, a significant sum at all.
What happens to a stock when a dividend is distributed?
In the week before the distribution of the huge dividend, Zim jumped another 25% against the background of those investors who rode on the hype, and those who wanted to receive 17 dollars for each share they hold. There are many investors who think that this is a gift, but you have to remember that it doesn’t work that way (because otherwise everyone would be doing it).
What is ex day and how does it affect the stock?
Ex day – Ex day is the day from which the investor is not entitled to receive the dividend for that security. That is, in order to be entitled to the periodic dividend, the investor must purchase the security before the ex-date.
A dividend has to come from somewhere – and of course it comes from the company’s coffers. Therefore, on the ex-date the stock itself decreases by the amount of the dividend. For example: if a stock is trading at $100 and pays a dividend of $5 per share, then the stock price will drop to $95. The norm is that the stock will open automatically when the amount of the dividend decreases – that is, you will receive the dividend in the bank account, but the value of your holding in the stock market will decrease by the amount of the dividend, and if that is not enough, you also pay capital gains tax on the dividend, so be “smart” and buy on the ex day or before it, it’s not necessarily a very smart move – unless you expect the stock to continue to rise.
What happened to the stock on the previous ex day?
On the big dividend day in March, as mentioned, Zim distributed 17 dollars, the stock opened with a decrease of 14 dollars and closed with a decrease of only 11 dollars, so that if a person purchased the share before X-day, in this special case and considering the fact that he sold the day after, he was able to make a profit of 6 dollars per share But – if he had waited only two days, he would have experienced a 10% drop in two days, and would lose on the “move” he made.
Absurdly, the distribution of the large dividend to investors is the one that also marked the stock’s all-time high, to which it has not returned – since that dividend Zim has dropped 44% with the drop in shipping prices, easing of supply chain problems and lukewarm reports.
Let’s go back to the present – the ex-day of the upcoming dividend that Zim announced in the report about two weeks ago in the amount of $4.75 is this Friday, which means that in order to be eligible to receive the dividend we will have to hold the Zim shares on this Thursday (the day before the X-day), and on Friday, Zim will automatically open down $4.75. On September 8, the amount of the dividend is expected to enter the investors’ accounts.
Wait, if she’s sure to go down on the day of the ex, why not make a short?
As mentioned, there are no gifts in the stock market, if on X day you hold a short on Zim shares, you are holding shares of a person who lent you the shares as a short operation, so you are the ones who will have to pay him the dividend in return for lending you his shares. So the dividend amount of $4.75 has left your account, while Zim’s shares will be worth less than $4.75, meaning – balanced.
Zim is now trading at a market capitalization of $5.8 billion after a 10% year-to-date decline, with a current earnings multiple of 1, a multiple that obviously invites a lot of investors to the stock. The sales multiple stands at 0.4, also a very tempting figure, with net cash of $211 million. The problem is that the transport prices are falling – therefore Zim’s results are also expected to be damaged in the future. The big question, of course, is how long prices will remain relatively high and when reality will return to normal. In case of a quick return to normality – the decline in Zim stock is expected to continue.