Domino's Pizza (NASDAQ:DPZ) Has Announced That It Will Be Increasing Its Dividend To $1.74

The board of Domino's Pizza, Inc. (NASDAQ:DPZ) has announced that it will be increasing its dividend by 15% on the 28th of March to $1.74, up from last year's comparable payment of $1.51. This takes the annual payment to 1.4% of the current stock price, which unfortunately is below what the industry is paying.

View our latest analysis for Domino's Pizza

Domino's Pizza's Payment Could Potentially Have Solid Earnings Coverage

It would be nice for the yield to be higher, but we should also check if higher levels of dividend payment would be sustainable. Before making this announcement, Domino's Pizza was easily earning enough to cover the dividend. This means that most of what the business earns is being used to help it grow.

Looking forward, earnings per share is forecast to rise by 26.7% over the next year. If the dividend continues on this path, the payout ratio could be 34% by next year, which we think can be pretty sustainable going forward.

Domino's Pizza Has A Solid Track Record

The company has been paying a dividend for a long time, and it has been quite stable which gives us confidence in the future dividend potential. The dividend has gone from an annual total of $1.00 in 2015 to the most recent total annual payment of $6.04. This implies that the company grew its distributions at a yearly rate of about 20% over that duration. Rapidly growing dividends for a long time is a very valuable feature for an income stock.

The Dividend Looks Likely To Grow

Investors could be attracted to the stock based on the quality of its payment history. Domino's Pizza has seen EPS rising for the last five years, at 12% per annum. Domino's Pizza definitely has the potential to grow its dividend in the future with earnings on an uptrend and a low payout ratio.

Domino's Pizza Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. Earnings are easily covering distributions, and the company is generating plenty of cash. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Companies possessing a stable dividend policy will likely enjoy greater investor interest than those suffering from a more inconsistent approach. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 3 warning signs for Domino's Pizza (of which 2 are concerning!) you should know about. Is Domino's Pizza not quite the opportunity you were looking for? Why not check out our selection of top 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.