Dunkin' Brands Serves Mix Of Dividend, Capital Gains


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Dunkin' Brands ( DNKN ), the operator of Baskin-Robbins ice cream parlors and Dunkin' Donuts stores, is serving up a balanced diet of capital gains and dividends.

The stock is up 18% this year, almost double the S&P 500.

Dunkin' Brands went public in July 2011, five years after the company was bought by a private-equity firm. Profits have increased for four straight years. However, quarterly profit growth has slowed for three straight quarters, rising just 13% in the fourth quarter from a year ago. Revenue growth has also slowed, with sales actually decreasing in the most recent period.

Yet the company boosted its quarterly dividend at the end of January by 27% to 19 cents a share, or 76 cents annually. That was the first hike since Dunkin' began paying a dividend in Q1 2012. The annual dividend yield is now about 2%, roughly in line with the S&P 500 average.

Analysts say Dunkin' enjoys solid growth prospects, as noted in a recent New America story in IBD .

As part of its expansion beyond its stronghold in the Northeast, Canton, Mass.-based Dunkin' has in recent weeks announced plans for new franchises in West Virginia, Ohio and Utah. It eventually plans to expand west into California.

Dunkin' is also adding to its menu, recently introducing chicken and tuna wraps to go with its traditional coffee-and-doughnuts fare and its growing list of sandwiches and baked goods.

One concern is Dunkin's huge debt-to-equity ratio of 534%, which could become a problem if interest rates rise. For now, though, increases in cash-flow per share and annual pretax margin bode well for the stock.

IBD-style investors could soon get a chance to buy the stock if it clears a 40.10 buy point from a flat base in fast trade.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Personal Finance Investing Ideas
Referenced Stocks: DNKN

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