ZIM Integrated stock: Plot thickens as dividend drought continues

ZIM Integrated Shipping (NYSE: ZIM) stock price collapsed by more than 7% on Wednesday as the company published weak financial results. It plunged to a low of $7.22, which was much lower than the closing price of $7.80.

Dividend drought continues

The shipping industry is going through major headwinds as demand dries, costs rises, and prices retreat. A few weeks ago, I wrote about Maersk, the giant shipping company thar announced a big revenue drop and job cuts.

ZIM Integrated, one of the most popular shipping stocks in Wall Street, published another set of weak financial results. Its net loss for the third quarter came in at over $2.2 billion. It had made a profit of over $1.1 billion in the same quarter in 2022. 

ZIM Integrated’s adjusted EBITDA crashed by over 89% to $211 million while total revenue dropped by 61% to $1.27 billion. Other numbers were also weaker than expected. Its average freight rate per TEU dropped by 66% to $1,139. In a statement, the CEO said:

Therefore, the company, according to its policy, ZIM will not pay a dividend this time. The company only pays dividends when it generates a positive free cash flow. This is an important issue since ZIM became a Wall Street darling during the pandemic as it returned millions to shareholders through dividends. 

ZIM, like other slow-growing shipping companies, are loved by investors because of their dividends. As a result, the end of the dividend era explains why the shares have plunged hard this year.

ZIM Integrated has a strong balance sheet, with over $3.1 billion in liquidity. Also, economic data from China showed that the economy has started bouncing back. Industrial production and retail sales bounced back in October. 

Still, there are concerns that the company will need to raise cash if the shipping industry continues its challenges. Raising capital, mostly through equity, will likely lead to dilution of existing shareholders.

ZIM Integrated stock price forecast

ZIM chart by TradingView

Turning to the daily chart, we see that the ZIM share price has been in a strong bearish trend as the shipping industry woes continue. Most recently, the stock has plunged below the support at $11.75, the lowest point in December and January this year. 

The stock price has plunged below all moving averages while the Relative Strength Index (RSI) and MACD have drifted downwards. Therefore, the shares will likely continue falling in the coming months. If this happens, the stock will drop to the key support at $5.