Only Three Days Left To Cash In On Domino's Pizza Group's (LON:DOM) Dividend
Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that Domino's Pizza Group plc (LON:DOM) is about to go ex-dividend in just three days. The ex-dividend date is two business days before a company's record date in most cases, which is the date on which the company determines which shareholders are entitled to receive a dividend. The ex-dividend date is an important date to be aware of as any purchase of the stock made on or after this date might mean a late settlement that doesn't show on the record date. Thus, you can purchase Domino's Pizza Group's shares before the 13th of August in order to receive the dividend, which the company will pay on the 25th of September.
The company's upcoming dividend is UK£0.037 a share, following on from the last 12 months, when the company distributed a total of UK£0.11 per share to shareholders. Looking at the last 12 months of distributions, Domino's Pizza Group has a trailing yield of approximately 5.5% on its current stock price of UK£2.054. If you buy this business for its dividend, you should have an idea of whether Domino's Pizza Group's dividend is reliable and sustainable. As a result, readers should always check whether Domino's Pizza Group has been able to grow its dividends, or if the dividend might be cut.
Dividends are usually paid out of company profits, so if a company pays out more than it earned then its dividend is usually at greater risk of being cut. Domino's Pizza Group is paying out an acceptable 74% of its profit, a common payout level among most companies. Yet cash flows are even more important than profits for assessing a dividend, so we need to see if the company generated enough cash to pay its distribution. Thankfully its dividend payments took up just 46% of the free cash flow it generated, which is a comfortable payout ratio.
It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.
View our latest analysis for Domino's Pizza Group
Click here to see the company's payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with shrinking earnings are tricky from a dividend perspective. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's not ideal to see Domino's Pizza Group's earnings per share have been shrinking at 2.9% a year over the previous five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the last 10 years, Domino's Pizza Group has lifted its dividend by approximately 5.0% a year on average. That's interesting, but the combination of a growing dividend despite declining earnings can typically only be achieved by paying out more of the company's profits. This can be valuable for shareholders, but it can't go on forever.
To Sum It Up
Has Domino's Pizza Group got what it takes to maintain its dividend payments? We're not enthused by the declining earnings per share, although at least the company's payout ratio is within a reasonable range, meaning it may not be at imminent risk of a dividend cut. In summary, while it has some positive characteristics, we're not inclined to race out and buy Domino's Pizza Group today.
However if you're still interested in Domino's Pizza Group as a potential investment, you should definitely consider some of the risks involved with Domino's Pizza Group. Every company has risks, and we've spotted 3 warning signs for Domino's Pizza Group (of which 1 shouldn't be ignored!) you should know about.
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.