After nearly doubling over the past three years, the Dunkin’ Brands Group, Inc. (NASDAQ:DNKN) stock has pulled back and might be a potential pick for investors looking for balanced returns from asset appreciation and dividend income.
A 10% decline from its recent all-time might raise concerns for some investors. However, the the graph below reveals a recent pattern of similar pullbacks over the past two years.
Additionally, after all three previous drops, the share price recovered those losses almost as quickly as it dropped them. Also, the stock’s Relative Strength Index (RSI) is currently at 45 and has been as low as 39 in the trailing 30 days. This RSI level indicates that — far from being overbought — the stock is closer to the oversold level. Therefore, the RSI does not indicate a significant selloff in the near term.
Over the past four quarters, the company’s quarterly earnings have beat analysts’ expectations. On October 31, 2019, the company released the financial results for its third-quarter 2019, which ended on Sept. 28. In this report, Dunkin’ Brands revealed a 1.7% total revenue growth year-over-year to $356 million. Strong organic growth in the United States drove the overall revenue increase, despite weaker growth performance from international markets.
Net income of $72.4 million, or $0.86 per diluted share, was 9.5% higher than the $69.9 figure from the same period last year. The $0.90 adjusted earnings per diluted share figure was 8.4% higher than the $0.83 amount from last year, as well as 11.1% above the $0.81 earnings expectation by Wall Street analysts.
In light of these results, the company reiterated its full-year 2019 expectations.
“With one quarter remaining in 2019, we are reiterating our guidance for revenue and operating income growth,” said Kate Jaspon, Dunkin’ Brands Group’s Chief Financial Officer. “In addition to other updates to our 2019 targets, we are raising and tightening our guidance for earnings per share.”
The net earnings expectations increased from the $2.71 to $2.78 range previously to between $2.80 to $2.85. The outlook for the adjusted earnings per diluted share rose from between $3.02 and $3.05 to the new expected range between $3.10 and $3.12.
The company’s current quarterly dividend of $0.375 is nearly 8% above the $0.3475 quarterly payout from the same period last year. The current quarterly dividend payout is equivalent to a $1.50 annual dividend and a 2% dividend yield. Because share price advancement outpaced the dividend growth, Dunkin’s current yield is 8% below the company’s own 2.18% average yield over the last five years.
However, Dunkin’ Brands’ current dividend yield fared much better in comparison to the average yield of Dunkin’s industry peers. Dunkin’ Brand’s current yield was in line with the 2.02% simple average yield of the overall Services sector. However, Dunkin’s current yield outperformed the 1.99% average yield of all the companies in the Restaurants industry segment by nearly 12%.
Dunkin’ Brands began distributing dividends to its shareholders only in 2012. However, since 2012, the shareholders received a dividend payout boost every year. Over the past seven years, the company has enhanced its annual dividend distribution payout amount 150%. This advancement pace is equivalent to an average growth rate of 14% per year.
The company will pay the next round of its dividend distributions on the December 11, 2019, pay date to all shareholders of record as of Dec. 2. To claim the shareholder of records status and ensure eligibility to receive the dividend payout on the next payout date investors must claim stock ownership before the November 29, 2019, ex-dividend date.
While the company’s dividend rewarded shareholders with a slow but stable growth over several years, the share price advanced as well, but with significantly more volatility. In the second half of 2015, the share price lost nearly one third of its value and reached its five-year low below $38. However, the share price reversed direction, recovered all those losses by mid-2017 and has nearly doubled by late-November 2019.
The share price began the trailing 12 months with it’s a drop of more than 13% towards its 52-week low of 61.93 on December 24, 2018. However, after reversing direction in late-December 2018, the share price advanced more than 35% before it reached the new all-time high of $83.80 on September 4, 2019.
Since the September peak, the share price has experienced a 10.6% decline to close on Nov. 22 at $74.89. While noticeably below the recent peak, the Nov. 22 closing price was still 4.7% higher than it was one year earlier, nearly 21% above the 52-week-low from December, as well as 55% higher than it was five years ago.
Even with the recent pullback, the asset appreciation provided nearly 70% of the stock’s 6.8% total return over the trailing 12-month period. Longer-term shareholders enjoyed total return of nearly 50% over the last three years and more than 70% over the last five years.
Dunkin’ Brands Group, Inc. (NASDAQ:DNKN)
Founded in 1950 and headquartered in Canton, Massachusetts, the Dunkin’ Brands Group, Inc. develops, franchises and licenses quick service restaurants under the Dunkin’ Donuts and Baskin-Robbins brands worldwide. Currently, the company operates through the Dunkin’ Donuts U.S., Dunkin’ Donuts International, Baskin-Robbins U.S. and Baskin-Robbins International segments. In addition to the doughnuts coffee and ice cream, for which the two brands are known, the restaurants offer baked goods, breakfast sandwiches, shakes, malts, floats and cakes. In the third quarter of 2019, the company added 55 net new Dunkin’ locations in the United Sates and a combined total of 122 net new Dunkin’ and Baskin-Robbins locations globally. These additions raised Dunkin’ Brands’ total number of distribution points to approximately 21,000 locations in more than 60 countries worldwide – a 70% increase since the end of 2016.
Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.