Dunkin' Brands (DNKN) Hikes Dividend and Buyback Plans Ahead of Shaky 2020

America runs on Dunkin' (NASDAQ: DNKN). For everyone who's ever started their morning with a donut or two and a cup of coffee, this is more than just a clever ad slogan. This is a way of life. Dunkin' Brands, the company behind Dunkin' Donuts—now merely “Dunkin'”—recently announced some new plans ahead for dividends and share buybacks, and did so amid some rather unexpected conditions.

Sweet Moves for Dunkin' Investors

If you're already holding Dunkin' Brands stock, you've got a sweet proposition ahead. Dunkin' Brands not only reported an increased fourth-quarter profit for the year, but it also revealed plans to hike its dividend and launch a new buyback program for its stock. The dividend was to increase to $0.4025 per share—up 7.3%—and the stock buyback is set at $250 million total.

Dunkin' could afford to do such things, too; fourth-quarter net income was up to $57.7 million, or $0.69 per share. That's up 8.5% over the same time the preceding year, and overall revenue hit $335.9 million.

Better yet, that was on general increases. Comparable store sales were up 2.8%, which represented Dunkin's best showing in six years. Moreover, Baskin-Robbins—part of the Dunkin' lineup—kicked in solid results as well, with comparable-store sales up 4.1% at the ice cream giant.  If Dunkin' were using an adjusted basis for its returns, it would have returned $0.73 per share, which would have beat FactSet consensus of $0.70 per share.

Word from Dave Hoffman, Dunkin' Brands' CEO, noted that the company hadn't seen comparable sales growth this good in six years, and gave credit to rising sales in espresso and cold brew drinks. He also gave a nod to the recently-launched Beyond Sausage sandwich, which called on plant-based product Beyond Meat (NASDAQ: BYND) to fill the gap between biscuit halves.

It's Not All Sweet, Though

The news is certainly good coming out of Dunkin' Brands today, but tomorrow, it may not prove so sweet. The company is expecting adjusted earnings per share to fall in a range of $3.16 to $3.21. Sounds good, but analysts were looking for $3.29. This shortfall is based on a reduced sales growth on a comparable basis, and not just at Dunkin' but also at Baskin-Robbins locations.

Reasonable enough, especially in the short term; with winter making something of a reappearance across much of the country, ice cream isn't exactly on people's minds, and venturing out for donuts isn't exactly a huge priority either.

Reports also note that Dunkin' is carrying on with its earlier plans to retrofit franchisee locations, and expects to shell out around $40 million in upgrades. It's not just polishing up the old storefronts, either; it's also looking to open up between 200 and 250 new locations this year. Baskin-Robbins, meanwhile, is on track to close 25 locations.

A Strange Future for Dunkin'

While it's easy to see the potential for seasonal fluctuations in Dunkin' Brands, especially since it's got such a seasonal item as part of its lineup in Baskin-Robbins, it's also easy to see that Dunkin' is a hugely dynamic organization that often makes moves to accommodate changes in the market. Dunkin' isn't a company that's doing things the way it did in the 1980s because that was good enough for the last CEO; Dunkin' continually changes. We've been seeing the trajectory of these changes for years; Dunkin' was one of the first brands to really get behind mobile payments and the mobile order-ahead concept. The idea that you could just get out your phone and hit an app to have donuts and coffee waiting for you when you hit the drive-thru was outlandish for its time, but Dunkin' embraced it. McDonald's (NYSE: MCD) was also said to have seen some benefit from this approach, moving to kiosk-based ordering systems in some areas.

Now, it's reaping the rewards with increased sales and new product lines. The retrofitted current locations certainly won't hurt—more options for customers seldom ends poorly—but with winter on and ice cream demand dropping, not to mention a customer increasingly looking for healthier menu options when it comes to eating out, it's easy to see where sales might slip a bit. Making its stock more attractive with a higher dividend and a likely higher price thanks to reduced availability could give Dunkin' a shot in the arm as we start looking to spring.

Dunkin' has never been the type to rest on its laurels, and it's definitely being pro-active here. Whether or not that will pay off going forward, though, is the kind of thing only next quarter's numbers can say.