Picture supply: Domino’s Pizza Group plc
On Saturday 4 April, I highlighted FTSE 250 inventory Domino’s Pizza (LSE: DOM) as a sexy UK dividend play. On the time, it was trying low-cost and I mentioned it was value a better look.
In hindsight, it was certainly value a better look, as had somebody purchased £5,000 value of shares on Tuesday, 7 April, when the inventory market opened after the Easter break, that funding would now be value about £5,800 – a terrific lead to a bit over two weeks!
The strongest development in 11 quarters
Is the inventory nonetheless value a take a look at present ranges? I feel so.
Earlier at present (23 April), the corporate posted a buying and selling replace for Q1. And whereas it was transient, it was very encouraging.
For the quarter, complete system gross sales elevated by 5.8%, with like‑for‑like development of 4.5% (its strongest development in 11 quarters). In the meantime, complete orders rose by 2.3%, with like‑for‑like orders up 0.9%.
By way of price administration, the corporate mentioned that its prices are hedged for the present monetary yr with some prices hedged into 2027. That’s clearly a constructive.
As for steerage, the group mentioned that it at present expects to attain its earnings expectations for the complete yr. I’m not precisely positive what these expectations are however the market is at present on the lookout for 18p per share in earnings.
We have now carried the constructive momentum seen on the finish of 2025 into 2026, with buying and selling performing in keeping with our expectations.
Domino’s Pizza CEO Nicola Frampton
Tasty new merchandise
It’s value noting that on the product entrance, the corporate mentioned that it efficiently launched ‘CHICK ‘N’ DIP’ throughout the quarter. Preliminary buying and selling efficiency right here met expectations with constructive suggestions from clients.
It additionally mentioned that it had just lately launched its ‘Italianos’ pizza vary which is constructed on a skinny crust pizza assortment. I feel this may very well be a winner for the corporate – shoppers at present are sometimes on the lookout for the sort of pizza.
So total, enterprise efficiency seems sturdy. Nonetheless, there doesn’t appear to be any signal of a serious slowdown from GLP-1 weight-loss medication, which is a future danger.
How’s the valuation?
As for the valuation, the inventory nonetheless seems low-cost. If we take that 18p per share earnings forecast and examine it to the present share worth of 201p, we get a forward-looking price-to-earnings (P/E) ratio of simply 11.
That strikes me nearly as good worth. Particularly when you think about the corporate’s sturdy model and excessive return on capital.
What in regards to the dividend yield?
Zooming in on the dividend yield, it’s nonetheless very engaging, regardless of the current share worth rise. With analysts anticipating a payout of 11.1p per share for 2026, we’re a yield of round 5.5%.
It’s value declaring that dividend protection (the ratio of earnings per share to dividends per share) is stable at round 1.6. That’s one of many causes I highlighted the inventory a number of weeks in the past – it has significantly better dividend protection than a whole lot of different high-yield UK shares.
Put all this collectively, and there’s lots to love about Domino’s from an funding perspective. I consider this inventory is worthy of additional analysis.
