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DPZ increased dividend by 18.18%

DPZ, Domino’s increased the dividend by 18.18% making this dividend challenger’s 7th consecutive year dividend increase.

The old dividend rate was 2.20 annual dividend payout (0.55 quarterly), the new rate is 2.60 (0.65 quarterly).

Our current fair value of the company is $255.16 a share so at the current price of $248.57 the stock is undervalued. In order for this stock to be marked a “buy” our three conditions must be met for us to buy the stock.

The three conditions that the stock must meet are:

1) in a correction mode – pass
2) the current stock price must be below a fair value – pass
3) the 5 year average dividend yield must be lower than the current yield – pass

Since all of the conditions are met, we mark it a “BUY”.

The current yield is 1.05%.

The 10 year YOC would be 6.52% with no dividend reinvestment and 8.29% with DRIP. This is a great dividend growth but won’t be able to reach 10% YOC in 10 years, at least not at current yield. However, the average 5 year dividend growth rate of 22.50% makes this stock a great holding in a dividend growth portfolio.

The company share price outperforms the S&P 500 index in long term. If you invested 10,000 dollars in 1995 and held for the last 14 years, the stock average total return would be 28.05% vs 8.74% of the index, and your holding would grow to a staggering $374,142.76 dollars as opposed to $32,949.48 dollars of the index. And since DPZ is also involved in technology, rather than just making great pizza, there is a great potential for more growth in the long run (just ignore what others say and all the gloom-doom scary cats say, they just see the stock until the next quarter and due to their short sight they miss the bigger picture). Therefore, the recent selling is a good opportunity.

This make this stock a great source of income in the long run, but also provides a good source of growth for your portfolio. I consider this stock a good addition for dividend portfolio accumulation and growth phase. If you are looking for both – dividend yield, dividend growth, and capital appreciation outperforming the index, then this stock is for you.

Note, that during accumulation phase, I recommend seeking both – the dividend growth and capital appreciation. If you are a retiree and plan on living solely from your dividends then you do not need capital growth and this income stock is a safe investment.

Disclosure: Currently, I do not own DPZ stock at this moment. It is in our watch list and since it is now ranked as “buy” we may initiate a position in this stock in the near future (given, it still stays ranked as BUY at the time of purchase).

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