What do you look for in an investable business? Dividends, buybacks or maybe revenue growth? You can find all of the above and more with fast-food giant Wendy’s (NASDAQ:WEN) stock.
Sure, there are risks involved in food-related investments during a time of high inflation. Still, WEN stock deserves a “B” rating as a result Wendy’s firm financials and the company’s commitment to reward its shareholders.
First things first. There’s been chatter about whether Trian Fund Management will take over Wendy’s. Nelson Peltz is Wendy’s non-executive chairman, and he’s also Trian’s chief executive; moreover, Trian is Wendy’s largest shareholder.
Reportedly, Trian Fund Management doesn’t currently intend to pursue a takeover of Wendy’s. So, now investors can concentrate on what’s important right now: Wendy’s value proposition, which could be quite favorable in 2023.
Fresh off the presses, Wendy’s gave a the bulls a full-course meal of positive data points in its preliminary fourth-quarter 2022 results. Peltz commented that “Trian believes that the Company is well-positioned to deliver significant long-term value for shareholders,” and it’s easy to see why he would feel this way.
As it turns out, Wendy’s total revenue for the quarter increased 13.4% year over year to $536.5 million. At the same time, Wendy’s general and administrative expenses decreased 6.4%. That’s an impressive feat during a time of high inflation and supply-chain disruptions.
Turning to the top-line results, Wendy’s grew its operating profit 9.2% year over year to $84 million. In addition, the company improved its adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) by 20.3% to $123.5 million – not too shabby.
Wendy’s was already a decent dividend payer in 2022. However, the company delivered a nice surprise by disclosing that Wendy’s is doubling its quarterly dividend payout to 25 cents per share. Yet, this is only part of Wendy’s new capital allocation strategy.
The other part is Wendy’s doubling of its $250 million share-repurchase program to $500 million. This new share-buyback program will, according to the company, expire in February of 2027.
Thus, Wendy’s has revealed its long-term commitment to support share buybacks, which can be taken as a positive sign for the company. It’s also encouraging that Wendy’s is rewarding its loyal shareholders with generous dividend distributions.
Think about it: Businesses that are struggling typically can’t afford to pay healthy dividends like Wendy’s is doing. Also, it’s a sign of self-confidence when a company buys large quantities of its own shares.
WEN stock hasn’t moved much recently. Could a breakout be imminent, though? It’s hard to know for certain as high inflation could impact fast food sales in 2023.
Nevertheless, it’s notable that Wendy’s is doubling its dividend and share buyback program. On top of all that, Wendy’s preliminary financial results indicate a steady upward trajectory. Therefore, some investors might choose to take a chance on Wendy’s with a moderately sized, long-term share position.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
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