Domino's Shares Hit 52-Week High On Recapitalization Plan
Shares of Domino's Pizza hit a 52-week high Wednesday after the pizza delivery chain completed a recapitalization plan that included a big one-time dividend for shareholders.
After the market closed Tuesday, Domino's said it borrowed $1.85 billion at a rate of 6.19 percent to pay a dividend of $13.50 per share on May 4.
The chain also said its board of directors authorized share repurchases of up to $200 million.
CIBC World Market analyst John S. Glass said Domino's "delivered on its promise to pay a significant one-time dividend" which was far higher than his estimate of $8.50 a share.
"We are pleased that the company was able to borrow so much for so little," he added in a note to investors. "This may also inspire others within the franchised-restaurant universe to consider a similar move, in our view, given Domino's warm reception in the debt markets."
Friedman Billings Ramsey analyst Ashley Woodruff said the dividend was more than she expected, with a slightly better interest rate on the loan. Woodruff raised her price target on the shares to $39 from $38.
However, in an analyst note Woodruff said the chain will most likely report a "messy" first quarter on May 2 since the company will need to account for one-time transaction fees.
JPMorgan analyst John Ivankoe concurred that the quarter may not be an easy one for investors to swallow, but he said shareholders may see better earnings results in the future.
"We encourage investors to focus on long-term earnings as we expect near-term earnings to be unpredictable given timing of certain events and one-time costs," Ivankoe said in a note.
Shares added 75 cents, or 2.2%, to $34.26 in morning trading on the New York Stock Exchange in heavy trading. Earlier, the stock hit a new 52-week high of $35.67, eclipsing a previous high of $33.99 set April 4.