Dunkin' Outperforms S&P 500 With 30% Pop This Year


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Coffee, doughnut, sandwich and ice cream retailerDunkin' Brands ( DNKN ) is a young player in the dividend space.

The company began paying a quarterly dividend of 15 cents a share in March 2012, and increased the payout to 19 cents a share in February.

The annualized yield is 1.8% vs. 2.50% for the S&P 500.

While the dividend payout is on the light side, capital appreciation paints a different picture. Dunkin' Brands is up more than 30% year to date vs. 16% for the S&P 500.

New factors could be behind the outperformance.

In 2006, a consortium of private equity firms wrapped up the acquisition of Dunkin' Brands and brought a strategy to take the then-regional franchiser national. An IPO was launched in 2011.

As of June, Dunkin' Donuts restaurants were in 40 states and 30 foreign countries, and Baskin-Robbins stores were in 43 states and 45 countries.

Internationally, Vietnam is the latest new market for Dunkin' Brands.

At the July 25 earnings call, CEO Nigel Travis said the company also is growing outside the morning business, offering sandwiches and snacks.

Earnings grew 161%, 16% and 51% in the past three years. The Street expects 20% EPS growth this year on a 7% sales pop. Annual revenue growth has been in the 5% to 9% neighborhood in recent years.

Pretax margin was 35.5% last year, the best in at least seven years. Return on equity, a measure of financial efficiency, was 27%. One negative is the debt-to-equity ratio, which is at 534%.

The stock is extended from a 40.10 buy point in a flat base. However, Dunkin' is consolidating along its 10-week line. A new base would still be early stage, thanks to several base-on-base structures.

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: Investing Investing Ideas
Referenced Stocks: DNKN

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