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Understanding Zimmer Biomet’s Latest Dividend Announcement

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Oct. 11 2020, Updated 11:03 a.m. ET

ZBH’s latest dividend announcement

On December 18, 2017, Zimmer Biomet Holdings (ZBH) announced a quarterly cash dividend of $0.24 per share for fiscal 4Q17. The dividend is payable on January 29, 2018, to shareholders of record on December 29, 2017, and it’s equivalent to the quarterly dividends it paid to shareholders in 2016.

ZBH didn’t increase its dividend in fiscal 2017. Its indicated annual dividend rate in fiscal 2017 was $0.96 per share, and as of December 27, 2017, ZBH’s dividend yield was ~0.80. Its dividend payout ratio of is now 62.7%.

On December 27, 2017, peers Stryker (SYK), Medtronic (MDT), and Becton, Dickinson and Company (BDX) have dividend yields of ~1.2, ~1.4, and ~2.0, respectively.

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ZBH’s capital allocation strategy

Disciplined capital allocation is one of ZBH’s key strategies. The company has been paying consistent dividends to its shareholders since it was formed with the merger of Zimmer Holdings and Biomet in 2015, but it hasn’t been distributing increasing dividends—its dividend amount for the past two years has been the same.

ZBH increased its quarterly dividend in 1Q16 by ~9.1%. During the first nine months of 2017 (ended September 30, 2017), ZBH paid $145 million in dividend payments to its shareholders. During the same period of fiscal 2016, the company made dividend payments totaling $140.3 million.

After the merger, ZBH prioritized debt repayment for capital allocation. The company also made a number of strategic acquisitions to expand its capabilities and create shareholder value.

ZBH’s share repurchase program

Notably, ZBH suspended its share repurchase program in April 2014 due to its impending merger. The program was reinstated in October 2015, and ZBH authorized a new $1-billion share repurchase program. As of September 30, 2017, the entire $1 billion of authorized shares are available for repurchase.

Interested investors can check out the iShares Russell 1000 Value ETF (IWD) for diversified investment in Zimmer Biomet Holdings. ZBH accounts for ~0.19% of IWD’s total portfolio.

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