Dividends can be underrated but they form a large part of investment returns, playing an important role in compounding returns in the long run. Dunkin’ Brands Group Inc (NASDAQ:DNKN) has returned to shareholders over the past 6 years, an average dividend yield of 2.00% annually. Should it have a place in your portfolio? Let’s take a look at Dunkin’ Brands Group in more detail.
See our latest analysis for Dunkin’ Brands Group
5 questions I ask before picking a dividend stock
If you are a dividend investor, you should always assess these five key metrics:
- Is it the top 25% annual dividend yield payer?
- Has it paid dividend every year without dramatically reducing payout in the past?
- Has dividend per share amount increased over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it be able to continue to payout at the current rate in the future?
How well does Dunkin’ Brands Group fit our criteria?
The current trailing twelve-month payout ratio for the stock is 31.98%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 49.90%, leading to a dividend yield of around 2.18%. However, EPS is forecasted to fall to $2.72 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.
Reliablity is an important factor for dividend stocks, particularly for income investors who want a strong track record of payment and a positive outlook for future payout. The reality is that it is too early to consider Dunkin’ Brands Group as a dividend investment. It has only been consistently paying dividends for 6 years, however, standard practice for reliable payers is to look for a 10-year minimum track record.
In terms of its peers, Dunkin’ Brands Group produces a yield of 2.00%, which is on the low-side for Hospitality stocks.
Next Steps:
If you are building an income portfolio, then Dunkin’ Brands Group is a complicated choice since it has some positive aspects as well as negative ones. But if you are not exclusively a dividend investor, the stock could still be an interesting investment opportunity. Given that this is purely a dividend analysis, you should always research extensively before deciding whether or not a stock is an appropriate investment for you. I always recommend analysing the company’s fundamentals and underlying business before making an investment decision. There are three key aspects you should further research:
- Future Outlook: What are well-informed industry analysts predicting for DNKN’s future growth? Take a look at our free research report of analyst consensus for DNKN’s outlook.
- Valuation: What is DNKN worth today? Even if the stock is a cash cow, it’s not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether DNKN is currently mispriced by the market.
- Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.