Domino's Pizza Group plc (LON:DOM) Pays A UK£0.035 Dividend In Just Three Days

Readers hoping to buy Domino's Pizza Group plc (LON:DOM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. The ex-dividend date occurs one day before the record date which is the day on which shareholders need to be on the company's books in order to receive a dividend. The ex-dividend date is important as the process of settlement involves two full business days. So if you miss that date, you would not show up on the company's books on the record date. Therefore, if you purchase Domino's Pizza Group's shares on or after the 15th of August, you won't be eligible to receive the dividend, when it is paid on the 27th of September.

The company's next dividend payment will be UK£0.035 per share, and in the last 12 months, the company paid a total of UK£0.10 per share. Looking at the last 12 months of distributions, Domino's Pizza Group has a trailing yield of approximately 3.6% on its current stock price of UK£2.944. 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. So we need to check whether the dividend payments are covered, and if earnings are growing.

View our latest analysis for Domino's Pizza Group

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. Domino's Pizza Group paid out more than half (56%) 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. It paid out more than half (57%) of its free cash flow in the past year, which is within an average range for most companies.

It's positive to see that Domino's Pizza 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 business enters a downturn and the dividend is cut, the company could see its value fall precipitously. This is why it's a relief to see Domino's Pizza Group earnings per share are up 3.7% per annum over the last five years. Earnings per share growth has been slim, and the company is already paying out a majority of its earnings. While there is some room to both increase the payout ratio and reinvest in the business, generally the higher a payout ratio goes, the lower a company's prospects for future growth.

The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Domino's Pizza Group has delivered an average of 7.1% per year annual increase in its dividend, based on the past 10 years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.

To Sum It Up

From a dividend perspective, should investors buy or avoid Domino's Pizza Group? Earnings per share have been growing modestly and Domino's Pizza Group paid out a bit over half of its earnings and free cash flow last year. Overall, it's not a bad combination, but we feel that there are likely more attractive dividend prospects out there.

So if you want to do more digging on Domino's Pizza Group, you'll find it worthwhile knowing the risks that this stock faces. Every company has risks, and we've spotted 4 warning signs for Domino's Pizza Group (of which 1 doesn't sit too well with us!) you should know about.

A common investing mistake is buying the first interesting stock you see. Here you can find a full list of high-yield dividend stocks.

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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.