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Dunkin' Brands Group Raises Dividend by 7.75%

By Joe Tenebruso - Feb 8, 2018 at 10:31AM

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CEO Nigel Travis says returning capital to shareholders remains a priority.

Dunkin' Brands Group (DNKN) reported fourth-quarter results on Feb. 6. The parent company of Dunkin' Donuts and Baskin-Robbins continues to build out its store base as part of its national expansion strategy. And as its profits are growing, so is its cash payout to investors.

Dunkin' Brands Group results: The raw numbers

Metric

Q4 2017

Q4 2016

Year-Over-Year Change

Revenue

$227.1 million

$215.7 million

5.3%

Adjusted operating income

$123.5 million

$119.3 million

3.6%

Adjusted earnings per share

$0.64

$0.64

N/A

Data source: Dunkin' Brands Group Q4 2017 earnings release.

What happened with Dunkin' Brands Group this quarter?

Dunkin' Brands delivered comparable-store sales growth in all four of its major business segments. Comps in Dunkin' Donuts' U.S. and international stores rose 0.8% and 1.6%, respectively, while Baskin-Robbins' U.S. and international locations saw comps rise 5.1% and 3%, respectively. However, Dunkin' Donuts' and Baskin-Robbins' U.S. comp growth was driven by higher average ticket sizes; both chains suffered declines in traffic in the fourth quarter.

Franchisees opened 141 net new restaurants during the quarter, including 126 net new Dunkin' Donuts U.S. stores. For the full year, the company opened a total of 440 restaurants in 2017, year-over-year unit growth of 2.2%.

A Dunkin' Donuts storefront

Franchisees opened more than 300 new Dunkin' Donuts restaurants in 2017. Image source: Dunkin' Brands Group. 

In all, companywide revenue increased 5.3%, to $227.1 million. Adjusting for the extra week in the fourth quarter of 2016, revenue rose 9.8%.

In turn, and again on a 13-week basis, adjusted operating income improved by 9.2%, to $123.5 million. Adjusted net income rose 2.7%, to $58.4 million, and adjusted EPS -- boosted by share repurchases -- increased 4.9% to $0.64.

Looking forward

For 2018, Dunkin' Brands is targeting general and administrative expenses to come in at 2% of systemwide sales. The company also anticipates that its effective tax rate will be approximately 28%, down from 38.5% in 2017, due to the expected benefits of tax reform.

Additionally, Dunkin' Brands' board of directors authorized a 7.75% increase in the company's quarterly cash dividend, to $0.3475 per share. At Wednesday's closing price, that gives the stock a dividend yield of roughly 2.4%.

"As you all know, we don't typically have significant cash needs because of our asset-light, 100%-franchise business model," CEO Nigel Davis said during a conference call with analysts. "So additional earnings will underscore our long-stated capital and investment priorities, which has always been and will continue to be returning it to shareholders."

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