Domino's Pizza (DPZ): $13.50 dividend pays today but at what price?

It hurts when you walk into the office Monday morning and see that your company stock has fallen 38% over the weekend even if you are receiving a special dividend of $13.50 a share. You could say "it’s a wash" but you have to question, is it really worth the price? Domino’s Pizza Inc. (DPZ) reported quarterly profit fell 68% last Wednesday and that’s just the begininng.

Today (5/7) is Domino’s ex-dividend date so shareholders are getting that wonderful dividend in their brokerage accounts sometime today if not over the weekend. That $13.50 a share dividend was made possible by $1.85 billion in borrowing. Last week Domino’s disappointed Wall Street with a 2.4% drop in revenue to $339.3 million when analysts were expecting a 2.5% rise.

The figure that I liked the least was the 2.9% drop in U.S. same-store sales. Domino’s Pizza international stores saved them which reported sales increasing by 3.8%. But this seems to be a popular trend with U.S. stocks lately – revenue here at home fails to impress but overseas the company is pulling in Euro’s left and right.

The latest take by Wall Street analysts occurred May 3rd, when Friedman Billings reiterated their "outperform" rating on DPZ shares and reduced their price target from $39 to $36.50.

In February, Domino’s announced a plan to refinance its current debt and take out a large low-interest loan backed by its revenue-generating assets. The plan is to return capital to shareholders and make everyone happy.

Domino’s Pizza brought in $435M in revenue last year, not bad for making pizzas but you have to ask yourself – how much larger can they grow? Everyone who ever wanted to open a Domino’s store has done so in the U.S., that fad starting getting old 10 years ago. So you look for growth overseas, pay out a fancy dividend, and hope American’s keep buying your stock and pizza. However we all know the Street only cares about two things – Growth and Guidance. So what more can Domino’s do to make buying their stock worth your time and savings? And how much growth can Domino’s hope to accomplish in the next five or ten years?

Don’t run out to buy Domino’s because shares look so cheap today at $19.72. Just keep in the mind the big picture. Even if they bring The Noid back, they aren’t going to start selling 10,000,000 more pizzas, it’s just reality.

Frank Lara Jr.

Frank Lara Jr. can be reached at [email protected]; he does not own securities in the companies he covers.