My Top Dividend Stock To Buy In March
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February has shaped up to be another interesting month in the stock market, with quite a few stocks taking deep dives—some for good reason, others not so much.
Take Old Dominion Freight Line (ODFL), for example. Earlier this month, the stock sank over 10% in a single day after rumors surfaced that Amazon was planning to enter the less-than-truckload (LTL) freight space.
That kind of news could certainly pose a threat to a company like Old Dominion—if it were true. But as it turns out, the panic was premature. There’s no real confirmation that Amazon is going down that road anytime soon.
Then there’s Zoetis (ZTS), a stock that’s been near the top of my watchlist for a while now. After reporting its Q4 earnings, the stock also saw a near 10% drop, despite posting results that, in my opinion, were actually pretty solid.
But while both of those sell-offs were noteworthy, no February decline was quite as large—or as delicious—as the one we saw with Wingstop (WING), which is my top dividend stock to buy in March.
Like Zoetis, shares of this fast-growing restaurant chain were hit hard after its latest earnings report. And while that may not be great news for current shareholders, for bargain-hungry dividend investors like ourselves, this is starting to look like an appetizing opportunity.
Source: Snapstock
In just the last month, the stock is down nearly 20%, bringing its total decline to about 30% over the past year. As we can see from the share price chart, WING has plummeted from its all-time high of around $430 per share in September to where it sits now, just below $240.
For those who bought near the top, it’s been a painful ride down. But for those of us who have been patiently sitting on the sidelines, this drop is making Wingstop look more and more like a prime opportunity—especially when you consider that the reason behind the sell-off really isn’t all that bad.
As I mentioned earlier, the catalyst for Wingstop’s decline was its Q4 earnings report. And on the surface, the results weren’t bad at all.
Total sales grew 27.6% year-over-year, an impressive jump for any business, while domestic same-store sales rose 19.9%—a clear sign of strong demand and customer satisfaction.
As a customer myself (on more than one occasion, I’ll admit), I can certainly attest to being satisfied after a hefty helping of their mango habanero boneless wings.
At any rate, moving to the bottom line, earnings per share (EPS) climbed to $0.92, up from $0.64 a year ago.
Those are undeniably strong results, but here’s where the problem lies.
Looking just at Q4, domestic same-store sales grew 10.1% year-over-year—a very solid number. But the market didn’t like the fact that this growth slowed compared to last year’s +21.2% comp.
In other words, growth is slowing down, and Wall Street hates when that happens. On top of that, the 10.1% figure also missed analyst expectations of +11.8%, which only added fuel to the sell-off.
But let’s put this into perspective: a 10.1% same-store sales increase is still an incredible number. Very few restaurant chains can consistently put up those kinds of figures, and the fact that Wingstop is growing at this pace after seeing a 21% surge last year is impressive.
Despite Wall Street choosing to focus on the slowdown, Wingstop still seems to be one of the most impressive—and frankly, surprising—growth stories in the restaurant industry, as we can see from the Snapstock chart below.
Source: Snapstock
Now, for dividend investors, Wingstop isn’t the kind of stock you buy for the yield. Admittedly, its current dividend yield is unimpressive—less than 1%—which understandably won’t excite those looking for immediate income.
But for those of us with time on our side, Wingstop’s dividend growth is what makes it worth considering. Over the last five years, the company has grown its dividend at an impressive 20% compound annual growth rate (CAGR).
Beyond that, Wingstop also has a history of rewarding shareholders with saucy special dividends every couple of years.
Source: Snapstock
Overall, Wingstop’s recent earnings report may have shaken some investors, but for those of us who like to buy great, growing businesses when the market overreacts, this pullback looks like an interesting opportunity.
WING has been on my watchlist for a couple of months now, and I’m keeping a close eye on it moving forward. If the current share price trajectory continues, I might just have to add it to the portfolio.
With that said, Wingstop isn’t the only good buying opportunity on the market right now. It looks like there are quite a handful more, and I want to hear from you: Which discounted stocks do you have your eye on as we make our way into March? Write to me here and let me know.
And if you want to learn about some other great buying opportunities right now, I've got a few more for you here.
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SINCE YOU ASKED 💬
"When you started, how much were you investing per month?"
- 13Baller14 | YouTube
When I first started investing, I was putting in about $25 a week—which was an amount that felt just right for me at the time.
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