There’s no shortage of utilities, telcos, and banks cranking out dividend checks. It’s rare to find a blue chip that is not returning money to its shareholders in the form of regular distributions. However, sometimes you’ll find some payouts coming from some unusual companies at a different phase of the growth cycle.
Wingstop (NASDAQ:WING), Sirius XM Holdings (NASDAQ:SIRI), and Momo (NASDAQ:MOMO) are three of the more unusual companies declaring dividends. The yields may not be high, but just the fact that they exist is surprising.
There’s no shortage of slow-growing restaurant chains making cash disbursements to their stakeholders, but Wingstop is a lot earlier in its lifecycle. The chain of restaurants specializing in chicken wings — of course — is killing it in the new normal. Systemwide sales soared 27% in its latest quarter.
Expansion is a big part of the 1,538-unit chain’s growth strategy, but store-level performance has been the real driver lately. Comps climbed 18.2% in its latest quarter, just as they have clocked in with double-digit upticks through the pandemic. The nature of Wingstop’s concept where most orders before the COVID-19 crisis were for either takeout or third-party app delivery helped out early in the pandemic, but the chain has also come through with 17 consecutive years of positive comps.
Let’s not forget about the payouts. Wingstop’s quarterly rate of $0.14 a share has doubled since it initiated a distribution policy four years ago. The 0.4% yield isn’t much given the stock’s triple-digit share price. However, it has also issued four large special dividends since 2016, pushing the effective yield much higher. It all adds up to $15.55 a share in total distributions in Wingstop’s brief tenure as a public company, and that’s not too shabby for a franchisee-fueled concept that went public at $19 in 2015.
Sirius XM Holdings
Satellite radio may not sound as exciting as it did a decade ago. Your in-car audio experience is no longer limited to terrestrial radio or whatever you have on your CD, cassette, or even 8-track tape deck. The convenience of Sirius XM as well as the breadth of its content is still compelling.
Even in that wacky 2020 that’s now fading in the rearview mirror — when we weren’t driving much and a satellite radio subscription could’ve been an easy luxury to cut — Sirius XM still grew its base of self-pay subscribers by 909,000 net additions. We’re at a record 30.9 million self-pay accounts now. Guidance calls for it to add another 800,000 subscribers to that total by the end of this year.
It was unfathomable to think of Sirius XM as a dividend payer in 2009 when it was on the brink of bankruptcy with its stock bottoming out at $0.05, but this is now a money machine. Sirius XM expects to generate roughly $1.6 billion in free cash flow on $8.35 billion in revenue this year. It’s not afraid to share the wealth.
Sirius XM issued its first quarterly dividend in late 2016, and it has hiked its rate every year. Its current yield of 0.9% may not be a life changer, but it is a welcome treat for investors in the satellite radio monopoly.
A few years ago there weren’t too many companies growing faster than Momo. The Chinese speedster had a pair of hot apps on its hands between its namesake social search platform and its Tantan online dating hub. Revenue growth was once spectacular, but top-line deceleration has been brutal:
- 2016: 299%
- 2017: 140%
- 2018: 51%
- 2019: 27%
- 2020: Decline of 9% through the first nine months of the year
Momo reports next week, and that’s when it should also declare its third consecutive annual distribution. After a rough 2020 investors may not be expecting much, but Momo continues to be very profitable and it has a cash-rich balance sheet. It has the financial wiggle room to increase its payout, but if it doesn’t we’re still looking at a 4.8% yield.
With 113.6 million monthly active users (at the end of September) Momo isn’t going away anytime soon. If it can keep dividend investors happy next week the ceiling will be higher than the floor as it tries to get its apps back on track.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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