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Does Dunkin’ Brands Group, Inc. (NASDAQ:DNKN) Have A Place In Your Portfolio?

Dividends play an important role in compounding returns in the long run and end up forming a sizeable part of investment returns. Historically, Dunkin’ Brands Group, Inc. (NASDAQ:DNKN) has been paying a dividend to shareholders. Today it yields 1.9%. Let’s dig deeper into whether Dunkin’ Brands Group should have a place in your portfolio.

See our latest analysis for Dunkin’ Brands Group

5 questions I ask before picking a dividend stock

When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:

  • Is their annual yield among the top 25% of dividend payers?

  • Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?

  • Has dividend per share risen in the past couple of years?

  • Is is able to pay the current rate of dividends from its earnings?

  • Based on future earnings growth, will it be able to continue to payout dividend at the current rate?

NasdaqGS:DNKN Historical Dividend Yield December 11th 18
NasdaqGS:DNKN Historical Dividend Yield December 11th 18

How well does Dunkin’ Brands Group fit our criteria?

The current trailing twelve-month payout ratio for the stock is 30%, which means that the dividend is covered by earnings. In the near future, analysts are predicting a higher payout ratio of 50% which, assuming the share price stays the same, leads to a dividend yield of around 2.1%. However, EPS is forecasted to fall to $2.81 in the upcoming year. Therefore, although payout is expected to increase, the fall in earnings may not equate to higher dividend income.

When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.

If dividend is a key criteria in your investment consideration, then you need to make sure the dividend stock you’re eyeing out is reliable in its payments. 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 7 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 generates a yield of 1.9%, which is on the low-side for Hospitality stocks.

Next Steps:

If Dunkin’ Brands Group is in your portfolio for cash-generating reasons, there may be better alternatives out there. 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 look at:

  1. 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.

  2. 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.

  3. 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.

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