It's Time to Load Up on This Iconic Dividend Stock

Key Points
Domino's Pizza grew its top line steadily and saw its free cash flow surge by more than 30% in fiscal 2025.
The company recently rewarded shareholders with a generous 15% increase to its quarterly dividend.
A combination of aggressive share repurchases and an upbeat long-term outlook makes the stock's current price look compelling.
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It has been a volatile stretch for investors in Domino's Pizza (NASDAQ: DPZ). After climbing to a 52-week high of nearly $500, shares of the world's largest pizza company have experienced a sharp drawdown.
Such a steep drop might prompt investors to wonder whether the underlying business is losing its edge in a highly competitive restaurant landscape. But a closer look at the company's recently reported fourth-quarter results suggests it isn't. Instead of a struggling operation, the numbers reveal a resilient business generating massive amounts of cash and aggressively returning it to shareholders.
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For investors looking to add a durable dividend payer to their portfolio, this sell-off has created an opportunity that is arguably too good to pass up.
Steady revenue and mouth-watering cash flow
Despite facing a challenging macroeconomic environment that has pressured consumer spending across the quick-service restaurant industry, Domino's continues to find ways to win.
The company's fourth-quarter revenue rose 6.4% year over year to $1.53 billion. This steady top-line performance was driven in part by a 3.7% increase in U.S. same-store sales, demonstrating that the company's value-oriented promotions and revamped loyalty program are successfully driving order volume.
And Domino's bottom line looked even better. Its fourth-quarter earnings per share came in at $5.35, up 9.4% from $4.89 in the year-ago quarter.
Further, the company's store footprint continues to expand rapidly, with Domino's adding 776 net new stores globally in fiscal 2025 alone.
But the most impressive metric from the company's fiscal 2025 results was its cash generation.
For the full year, free cash flow surged 31.2% year over year to about $672 million.
Returning capital to shareholders
With so much cash flowing through the business, Domino's management has not been shy about sharing the wealth. The company recently approved a 15% increase to its quarterly dividend, bringing the payout to $1.99 per share.
And dividends are just one part of the capital return story. The company is also reducing its overall share count, which helps boost earnings per share over time. During fiscal 2025, Domino's spent about $355 million repurchasing its shares.
And even after aggressively repurchasing its stock, the company exited the year with nearly $460 million in authorized share repurchases. This gives management plenty of firepower to opportunistically buy back stock while shares are trading at a discount.
Looking ahead
But can the company keep up its momentum?
I think so.
Domino's has laid out long-term guidance for the 2026 to 2028 period, targeting annual global retail sales growth of 7% or more. Given the company's recent momentum, I think growth like this is highly likely -- and investors can buy into this growth story at an attractive price.
Following the stock's recent sell-off, shares now trade at just 21 times earnings.
Then there's the company's dividend yield of 2.1%. And this dividend payout is based on a conservative payout ratio (the percent of earnings that go toward dividends). Domino's payout ratio was just 39% in fiscal 2025.
Of course, there are risks. For instance, as a number of technology companies like Uber increasingly build out delivery capabilities, it's difficult to tell whether this will enhance or erode Domino's competitive positioning. In addition, while Domino's has maintained its strong market position for decades, the company can't rest on its laurels; competition in the quick-service restaurant industry is notoriously intense.
I think investors who buy shares of this pizza giant today will be well-rewarded by a steadily growing dividend and a business model built to compound wealth over the long haul. Even better, they get to buy into this great company at an attractive price.
Should you buy stock in Domino's Pizza right now?
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Domino's Pizza and Uber Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.