It was the great Fidelity mutual fund manager Peter Lynch who urged investors to follow one particular mantra: Invest in what you know. Lynch, who has multiple daughters (I’m thinking it’s three, but I can’t quite remember), paid close attention to where they shopped when they were teenagers and landed some of his hottest picks as a result. One that stands out — to me, anyway — was retailer Gap Inc. (yes, I’m dating myself a bit here).
With that in mind, Bay Staters and Granite Staters alike, what institution more than any other appears to be a regular part of our lives? Hint: Its logo is orange and pink, which on the surface sounds like it wouldn’t work at all but…
Yes, of course. We’re talking about Dunkin Donuts. There seems to be one on every corner. For example, in Lowell alone there are 10 of them.
Have you ever thought of “Dunks” as anything more than a place to get your morning fix? Perhaps you ought to. There’s a lot to like about Canton-based Dunkin Donuts as an investment.
For starters, it isn’t obnoxiously valued for such a well-known brand. Shares closed Thursday at $60.02, which represents a price-earnings ratio of 22.6 for expected 2018 earnings of $2.65. Rich, yes. But not obnoxious. The price is pretty close to the midpoint of the stock’s 52-week range, which runs from $50.89 to $68.45. Shares have declined nearly 7 percent since the start of the year, so at this point you might be catching it while it’s taking a breather.
Dunkin Donuts stock is not volatile. At all. According to Yahoo Finance, it has a Beta of 0.24, meaning it’s only 24 percent as volatile as the market in general.
Lastly, and you knew this was coming… dividends! Dunkin Donuts began paying a quarterly dividend last year of 32.25 cents per share, or $1.29 per year. On Feb. 6, the company announced that it was increasing its quarterly dividend by 2.5 cents, to 34.75 cents per share (or $1.39 annually). This represents a 7.75 percent raise for shareholders. Did you get a 7.75 percent raise at your job this year? I’m betting you didn’t.
Based on Thursday’s closing stock price, the dividend offers a yield of 2.3 percent. Not bad. Certainly better than you’re going to get from a CD.
And so, local coffee enthusiasts, it seems you could do a lot worse than taking Peter Lynch’s age-old advice. Invest in what you know.
Disclosure: I do not own shares of Dunkin Donuts.