Domino's Pizza Group (LON:DOM) Is Due To Pay A Dividend Of £0.036

Domino's Pizza Group plc (LON:DOM) will pay a dividend of £0.036 on the 26th of September. This will take the dividend yield to an attractive 5.3%, providing a nice boost to shareholder returns.

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Domino's Pizza Group's Future Dividend Projections Appear Well Covered By Earnings

A big dividend yield for a few years doesn't mean much if it can't be sustained. Prior to this announcement, Domino's Pizza Group's dividend was comfortably covered by both cash flow and earnings. This indicates that a lot of the earnings are being reinvested into the business, with the aim of fueling growth.

The next year is set to see EPS grow by 10.3%. If the dividend continues on this path, the payout ratio could be 53% by next year, which we think can be pretty sustainable going forward.

See our latest analysis for Domino's Pizza Group

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The annual payment during the last 10 years was £0.0583 in 2015, and the most recent fiscal year payment was £0.11. This works out to be a compound annual growth rate (CAGR) of approximately 6.6% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.

Dividend Growth May Be Hard To Achieve

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. However, Domino's Pizza Group has only grown its earnings per share at 4.0% per annum over the past five years. Growth of 4.0% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This isn't bad in itself, but unless earnings growth pick up we wouldn't expect dividends to grow either.

Our Thoughts On Domino's Pizza Group's Dividend

Overall, this is a reasonable dividend, and it being raised is an added bonus. The dividend has been at reasonable levels historically, but that hasn't translated into a consistent payment. This looks like it could be a good dividend stock going forward, but we would note that the payout ratio has been at higher levels in the past so it could happen again.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. To that end, Domino's Pizza Group has 3 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about. Is Domino's Pizza Group not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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