Should Domino's Pizza Shares Be Part of Your Retirement Investment Strategy?
If wealthy investor Warren Buffett backs a stock, it often encourages other ordinary investors to jump in as well. Recently, we discovered that Domino's Pizza (DPZ falling by 2.07%) is one of his new investments, and since then, the stock has seen an upward trend.
But what if you're a retiree? While Domino's is a widely recognized brand and offers dividends, is it wise to include it in your retirement investment portfolio right now? Let's delve deeper into the company.
Domino's has been expanding, though at a slower pace compared to previous years
The last five years have been a rollercoaster for Domino's. The pandemic imposed stay-at-home orders led to a surge in revenue, making the stock a hot buy among investors. However, the business momentum has slowed down since then. In some recent quarters, the sales have even dropped compared to the previous year.
For pensioners, this trend may seem concerning. However, for Domino's, the stability is more crucial, and it has managed to post a profit of at least $125 million in each of the last four quarters, along with sales above $1 billion. Over the past year, its net profit margin has been over 12%, which could serve as a safety net if the economy worsens, and the company needs to adjust its pricing.
Another safeguard for investors is the company's dividend, which might seem modest.
Domino's has significantly boosted its dividend over the past decade
A dividend can be a vital aspect of a stock for pensioners, as it allows them to generate a consistent income without selling their shares. Domino's offers a dividend yield of 1.3%, which is approximately equal to the S&P 500's average.
Although the yield may not seem impressive, Domino's can still be a compelling dividend stock to possess. That's because, for retirees, the growth rate of the dividend is more appealing. Over the past decade, the company has increased its payouts by over 500%.
Significant dividend increases might not continue if the economy faces challenges. However, the good news is that with a payout ratio below 40%, the company has room to boost its dividend growth further, even if business growth slows down.
For retirees, whether a company increases its dividend or not can make a significant difference when selecting an income stock to buy, as it can counteract inflation and protect dividend income.
Is Domino's Pizza stock a suitable option for retirees?
Pizza delivery hasn't lost its allure after more than 135 years, with the first recorded delivery taking place in Italy back in 1889. Although the concept has changed over the years, the appetite for pizza remains, as evident from Domino's strong performance.
The stability the business offers investors and its growing dividend makes Domino's Pizza an attractive stock for retirees to hold onto. It's unlikely to see wild fluctuations in value and can provide retirees with a steady source of income through its dividend payments.
Given Warren Buffett's investment in Domino's Pizza and its consistent profitability, some retirees might consider investing their money in this stock for its dividend income. Over the past decade, Domino's has significantly increased its dividend, offering a 1.3% yield, which is comparable to the S&P 500's average. Moreover, the company's dividend growth rate of over 500% makes it an appealing choice for retirees seeking income stocks with the potential to counteract inflation.
