What took a 24% bite out of the Dominos’ dividend?

asx pizza share price represented by hand taking slice of pizza

asx pizza share price represented by hand taking slice of pizza

The Domino’s Pizza Enterprises Ltd (ASX: DMP) share price has come crashing down to earth on Wednesday.

In afternoon trade, the pizza chain operator’s shares are down 21% to $56.23.

This follows the release of the company’s half-year results, which fell short of the market’s already low expectations.

But the Domino’s share price isn’t the only thing in freefall today. This morning, the company revealed that it would be slashing its dividend.

The Domino’s board has elected to cut its interim dividend by a disappointing 23.8% to 67.4 cents per share.

Why has the Domino’s dividend being cut?

Domino’s was forced to cut its dividend in response to a sizeable profit decline during the first half.

For the six months ended 31 December, Domino’s reported a 1.2% increase in sales to $1.97 billion but a 21.5% decline in underlying net profit after tax to $71.7 million.

This poor form was driven by the company’s failure to combat inflation effectively. The company’s CEO, Don Meij, explained:

Given the challenging conditions and the effect on our franchisees we felt it was necessary to lift prices, including applying some surcharges. This was successful in protecting franchisee profitability, however given the speed of the change it was difficult to forecast the effect on customer repurchasing rates, especially where customers order less frequently such as Japan or Germany.

It meant while we saw an initial benefit to franchisees’ unit economics, specific customer groupings, particularly in delivery, reduced their ordering frequency which resulted in December trading being significantly below our expectations.

And while management suspects that the company may fall short of its medium term same store sales growth and store expansion targets in FY 2023, it remains positive on the future and expects to return to positive same store sales growth once it is able to balance the value equation for customers.

All being well, this could mean that the Domino’s dividend returns to growth again in FY 2024.

The post What took a 24% bite out of the Dominos’ dividend? appeared first on The Motley Fool Australia.

Should you invest $1,000 in Domino’s Pizza Enterprises Limited right now?

Before you consider Domino’s Pizza Enterprises Limited, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and Domino’s Pizza Enterprises Limited wasn’t one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

See The 5 Stocks
*Returns as of February 1 2023

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;

setButtonColorDefaults(“#43B02A”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43B02A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);

More reading

Motley Fool contributor James Mickleboro has positions in Domino’s Pizza Enterprises. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Domino’s Pizza Enterprises. The Motley Fool Australia has recommended Domino’s Pizza Enterprises. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/6HlfCPO

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s