Only Three Days Left To Cash In On Domino's Pizza Group's (LON:DOM) Dividend

Regular readers will know that we love our dividends at Simply Wall St, which is why it's exciting to see Domino's Pizza Group plc (LON:DOM) is about to trade ex-dividend in the next 3 days. Typically, the ex-dividend date is two business days before the record date, which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. Meaning, you will need to purchase Domino's Pizza Group's shares before the 14th of August to receive the dividend, which will be paid on the 26th of September.

The company's next dividend payment will be UK£0.036 per share, on the back of last year when the company paid a total of UK£0.11 to shareholders. Based on the last year's worth of payments, Domino's Pizza Group stock has a trailing yield of around 5.3% on the current share price of UK£2.058. 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.

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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 56% of its earnings to investors last year, a normal payout level for most businesses. 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 (54%) 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.

View our latest analysis for Domino's Pizza Group

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. This is why it's a relief to see Domino's Pizza Group earnings per share are up 5.6% per annum over the last five years. Decent historical earnings per share growth suggests Domino's Pizza Group has been effectively growing value for shareholders. However, it's now paying out more than half its earnings as dividends. If management lifts the payout ratio further, we'd take this as a tacit signal that the company's growth prospects are slowing.

Many investors will assess a company's dividend performance by evaluating how much the dividend payments have changed over time. In the last 10 years, Domino's Pizza Group has lifted its dividend by approximately 6.6% a year on average. We're glad to see dividends rising alongside earnings over a number of years, which may be a sign the company intends to share the growth with shareholders.

To Sum It Up

Has Domino's Pizza Group got what it takes to maintain its dividend payments? 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. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects.

With that being said, if dividends aren't your biggest concern with Domino's Pizza Group, you should know about the other risks facing this business. To help with this, we've discovered 3 warning signs for Domino's Pizza Group (1 is concerning!) that you ought to be aware of before buying the shares.

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.