Domino's 4Q14 Earnings: Income Rises But Profit Margins Fall (Part 11 of 14)
Dividends
In the previous part of this series, we briefly discussed how Domino’s distributed $14 million in dividends to its shareholders. Dividends affect a shareholder’s decisions about the company, since they serve as a source of constant income. Let’s see the dividend yields for Domino’s Pizza (DPZ) and its competition.
Dividends, which are paid in cash, come from a company’s ability to generate excess income, which is a function of higher sales and stable costs. As of the fourth quarter’s end in 2014, Domino’s had total cash and cash equivalents of $31 million.
Domino’s Pizza’s dividend per share in 4Q14 was $0.21. Domino’s had suspended dividends between 2008 and 2011, when the US was experiencing a recession and its aftereffects.
As of year-end 2008 and 2009, Domino’s had a revenue decline of 3% and 1%, respectively. When a company stops or reduces its dividends, it’s not usually a good sign. The move could mean that a company is having trouble generating excess cash.
Peer comparison
In the above chart, we see that Domino’s close peer, Yum! Brands (YUM)—the parent of Pizza Hut—had a dividend yield of 2.5%. Papa John’s (PZZA) had a dividend yield of 0.71%. Yum! Brands, however, continued its dividend program throughout the recession, whereas Papa John’s started distributing dividends only in 2013.
Darden Restaurant (DRI) and McDonald’s (MCD) have the highest restaurant yields, at 3.4% and 3.3%, respectively, and both are part of the Consumer Discretionary Select Sector SPDR Fund (XLY). XLY holds about 1.5% of YUM.
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