It looks like Dunkin’ Brands Group, Inc. (NASDAQ:DNKN) is about to go ex-dividend in the next 4 days. You will need to purchase shares before the 6th of March to receive the dividend, which will be paid on the 18th of March.
Dunkin’ Brands Group’s next dividend payment will be US$0.40 per share, and in the last 12 months, the company paid a total of US$1.61 per share. Based on the last year’s worth of payments, Dunkin’ Brands Group stock has a trailing yield of around 2.4% on the current share price of $66.53. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. As a result, readers should always check whether Dunkin’ Brands Group has been able to grow its dividends, or if the dividend might be cut.
Check out our latest analysis for Dunkin’ Brands Group
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Dunkin’ Brands Group paid out more than half (51%) of its earnings last year, which is a regular payout ratio for most companies. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Fortunately, it paid out only 48% of its free cash flow in the past year.
It’s positive to see that Dunkin’ Brands Group’s dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut.
Click here to see the company’s payout ratio, plus analyst estimates of its future dividends.
Have Earnings And Dividends Been Growing?
Businesses with strong growth prospects usually make the best dividend payers, because it’s easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. For this reason, we’re glad to see Dunkin’ Brands Group’s earnings per share have risen 12% per annum over the last five years. Dunkin’ Brands Group has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future.
The main way most investors will assess a company’s dividend prospects is by checking the historical rate of dividend growth. In the past eight years, Dunkin’ Brands Group has increased its dividend at approximately 13% a year on average. It’s great to see earnings per share growing rapidly over several years, and dividends per share growing right along with it.
Final Takeaway
Should investors buy Dunkin’ Brands Group for the upcoming dividend? Dunkin’ Brands Group’s growing earnings per share and conservative payout ratios make for a decent combination. We also like that it paid out a lower percentage of its cash flow. It’s a promising combination that should mark this company worthy of closer attention.
Curious what other investors think of Dunkin’ Brands Group? See what analysts are forecasting, with this visualisation of its historical and future estimated earnings and cash flow.
We wouldn’t recommend just buying the first dividend stock you see, though. Here’s a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.