Domino's Pizza Group's (LON:DOM) Upcoming Dividend Will Be Larger Than Last Year's

The board of Domino's Pizza Group plc (LON:DOM) has announced that it will be paying its dividend of £0.072 on the 9th of May, an increased payment from last year's comparable dividend. This makes the dividend yield 3.0%, which is above the industry average.

Check out our latest analysis for Domino's Pizza Group

Domino's Pizza Group's Dividend Is Well Covered By Earnings

We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. However, prior to this announcement, Domino's Pizza Group's dividend was comfortably covered by both cash flow and earnings. This means that most of what the business earns is being used to help it grow.

EPS is set to fall by 7.6% over the next 12 months. If the dividend continues along the path it has been on recently, we estimate the payout ratio could be 41%, which is comfortable for the company to continue in the future.

Dividend Volatility

Although the company has a long dividend history, it has been cut at least once in the last 10 years. The annual payment during the last 10 years was £0.05 in 2014, and the most recent fiscal year payment was £0.105. This works out to be a compound annual growth rate (CAGR) of approximately 7.7% a year over that time. It's good to see the dividend growing at a decent rate, but the dividend has been cut at least once in the past. Domino's Pizza Group might have put its house in order since then, but we remain cautious.

The Dividend Looks Likely To Grow

Given that the dividend has been cut in the past, we need to check if earnings are growing and if that might lead to stronger dividends in the future. Domino's Pizza Group has seen EPS rising for the last five years, at 13% per annum. With a decent amount of growth and a low payout ratio, we think this bodes well for Domino's Pizza Group's prospects of growing its dividend payments in the future.

Domino's Pizza Group Looks Like A Great Dividend Stock

Overall, a dividend increase is always good, and we think that Domino's Pizza Group is a strong income stock thanks to its track record and growing earnings. The company is generating plenty of cash, and the earnings also quite easily cover the distributions. However, it is worth noting that the earnings are expected to fall over the next year, which may not change the long term outlook, but could affect the dividend payment in the next 12 months. All of these factors considered, we think this has solid potential as a dividend stock.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. At the same time, there are other factors our readers should be conscious of before pouring capital into a stock. Just as an example, we've come across 4 warning signs for Domino's Pizza Group you should be aware of, and 2 of them are a bit unpleasant. Looking for more high-yielding dividend ideas? Try our collection of 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.