How Domino's Pizza Earned a Place in Berkshire Hathaway's Portfolio

Core Insights - Berkshire Hathaway has significantly increased its investment in Domino's Pizza, acquiring 1.28 million shares in Q3 2024, bringing its total holdings to 2.6 million shares valued at over $1 billion [2][4] - Despite a challenging macroeconomic environment affecting the restaurant industry, Domino's has shown strong earnings growth, with a 21.5% increase last quarter, outpacing the S&P 500's 9.2% growth [14] - Domino's has demonstrated impressive dividend growth, increasing its quarterly payout from $0.065 in 2004 to $1.74, reflecting a total growth of 2,576% over 12 years [13] Investment Activity - Berkshire Hathaway has made four separate purchases of Domino's shares over the past year, contrasting with its trend of being a net seller of stocks for 11 consecutive quarters [2] - The current market cap of Domino's Pizza is approximately $13 billion, with shares trading around $398.46 [8] Financial Performance - Domino's reported a revenue growth of only 3% year-over-year, indicating challenges due to reduced consumer spending and confidence [6] - The company has faced international headwinds, closing about 200 stores abroad due to a tough macro environment, with international same-store sales growth at 1.7%, compared to 5.2% in the U.S. [5] Dividend and Share Buyback Strategy - Domino's has a healthy dividend payout ratio of 39%, which is within the considered healthy range of 35% to 55% for dividend-paying stocks [15] - The company has initiated a share buyback program, repurchasing 166,000 shares for $75 million last quarter, with plans for an additional $540 million in buybacks [15][16] Long-term Outlook - The fundamentals of Domino's suggest a strong potential for continued dividend increases, making it an attractive investment for growth and income [17]