If you're looking for investment ideas, a great place to start is in Berkshire Hathaway's (BRK.B +0.14%)(BRK.A 0.03%) portfolio. Led by famed investor Warren Buffett, Berkshire's long-term track record in both picking stocks and buying businesses outright is exceptional.
This is evident by the stock's staggeringly good performance. Shares have risen at a compounded annual rate of about 20% since 1964, trouncing the S&P 500's (^GSPC +0.84%) 10.2% average annual gain during this period. Of course, the Oracle of Omaha makes mistakes, too. Overall, however, he's a legend.
This being said, here's one idea straight from Berkshire's portfolio: Domino's Pizza (DPZ 2.72%). Interestingly, this is one of Berkshire's more recent stock picks. The company added it to its portfolio during the third quarter of 2024. Not only is the business growing, but it's paying out a nice dividend to investors. Even more, the pizza delivery company has been delivering tasty, double-digit dividend increases to investors for years.
NASDAQ: DPZ
Key Data Points
Business growth
Even in an economic environment that Domino's CEO Russell Weiner described in the company's third-quarter earnings release as "a pressured global marketplace," the pizza delivery specialist managed to grow global retail sales 5.1% year over year during the period. This was fueled by 72 new stores (net of store closures) and same-store sales growth rates of 3% in the U.S. and 0.8% internationally.
Looking ahead, management's guidance implies even faster growth. Domino's said in its third-quarter update that it expects sales to grow about 6% year over year, with operating income rising 8% over this same period. Even more, the company expects sales to increase at a rate of 7% annually from 2026 through 2028.
Dividend growth
Domino's confidence in its growth plan is evident by the robustness of its most recent dividend increase. In late February 2024, management announced a 25% boost to its quarterly payout. This extends the company's long track record of double-digit dividend increases, which goes back more than a decade.
Notably, Domino's will likely announce another dividend increase this month when the company reports its fourth-quarter results on Feb. 24. Not only is this typically when Domino's announces dividend increases, but the company has hiked its quarterly dividend every year since 2014.
Further, management has also been returning capital to shareholders in the form of share repurchases. The company spent $190 million repurchasing its stock during the third quarter of 2024 alone. This is more evidence of management's confidence in its growth plan.
Warren Buffett or his investment lieutenants?
It's worth noting that a purchase of a stock by Berkshire doesn't always mean that Warren Buffett was behind it. The famed investor employs two other investment lieutenants who reportedly manage about 10% of the portfolio, which is currently valued at about $300 billion. Given that Berkshire's recent purchase of Domino's Pizza shares amounted to just $549 million, it may have been a purchase made by Berkshire employees Ted Weschler or Todd Combs. Warren usually swings bigger when he's batting.
Nevertheless, the Warren Buffett-backed Berkshire did initiate a stake in the stock. So, someone at the conglomerate loves the pizza company.
Given Domino's long history of rewarding shareholders with robust returns, the company's simple business model, and its shareholder-friendly capital return program, this definitely looks like a stock Buffett would buy, even though it may not have been his purchase personally this time. Sure, at 29 times earnings, shares don't look cheap. But Domino's is arguably a great business deserving of a premium price tag.
With all this said, Domino's is a good investment idea for investors looking to own a stock with a growing dividend. Though its dividend yield of 1.3% today isn't super attractive, the payout will likely grow over time. In addition, the company's history of repurchasing its shares suggests that shareholders will likely watch their stake in Domino's grow over time, even if they don't add to their position.
