The Week In Review: Domino's Pizza serves up a tasty dividend increase

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The Independent Online

Domino's pizza delivers. Yet again, the home delivery group has posted record results, ahead of forecasts, and a tasty dividend increase. Franchises are opening across the UK at a rate of almost 50 a year, and there are now 337 outlets catering for those of us too pressed for time, too lazy or too rubbish in the kitchen to cook our own dinner.

The Domino's you can invest in on the London stock market is the company holding UK and Ireland rights to the brand, established in the US in 1960. The first UK Domino's was opened in 1985 and although the most lucrative urban locations have been colonised, newer outlets benefit from brand recognition. Planning rule changes have made finding new sites tougher, but Stephen Hemsley, the chief executive, thinks Domino's can get to 800 outlets before reaching its limit.

The company plans a modest investment in a fourth distribution centre. But it is generating far more cash than it needs to invest, and there is consequently the prospect of share buy-backs as well as further dividend rises.

We said buy the stock last year and it has more than doubled. The much richer valuation could hold them back for a while but investors still have a long-term growth story to get their teeth into.


Life's a gas for BG Group at the moment. The natural gas group is producing more, selling it for higher prices, and consequently enjoying surging profits. And it is ploughing those profits into a string of projects that will mean greater production, greater diversification and still greater profits in the second half of the decade. The shares have been chased up to record levels. Benefits to come later in the decade can justify the price, though, and investors ought not rule out a takeover by one of the world's biggest oil and gas majors, even at the current level. Hold.


Rolls-Royce shares have put in a turbo-charged performance since we tipped the aero engines maker a little over a year ago. The rebound in airline passenger numbers means existing planes are flying more and need to be serviced more often, so Rolls-Royce has enjoyed a big rise in profitable maintenance work. Longer-term, there is a mighty order book for new engines and further maintenance work worth £19.7bn. Hold.


Provident Financial is one of the UK's biggest "sub-prime lenders", offering credit at high interest rates to those who find it impossible to get a loan or a credit card elsewhere. It is going backwards in the UK, but nascent door-to-door lending businesses in eastern Europe and Mexico are growing fast, keeping group profits on an upward path. Investors get a 6 per cent dividend yield, and the international division becomes a growth engine for this company in the later part of the decade. Buy.


RAC provides the consumer and business motorist with a huge range of services, from its famous breakdown assistance to driving instruction (through BSM) and vehicle leasing. The AA has been streets ahead in terms of exploiting its brand, with new financial services ventures, and RAC's results have failed to set any pulses racing. Investors should seek thrills elsewhere.


Reuters, which supplies the financial services sector with news and information, sparked alarm this week by admitting that the trading environment had not picked up as rapidly as it thought. It is bringing a host of new products on the market that ought to enable it to fight its arch-rival Bloomberg much more effectively. However, the main problem is the external environment, about which the company can do nothing. Wait before considering the shares.


Jardine Lloyd Thompson, the insurance broker, has been under the cosh as a result of falling premium rates, of which it gets a percentage cut when it brings together an insurer with a client wanting to insure. The falling dollar hasn't helped, and there have also been operational blunders. Shareholders have probably missed their chance to sell, but sentiment towards the shares is unlikely to turn soon.


There is a truly scrumptious little share on the AIM. It is Glisten, the confectionery maker whose products are a children's tea party of mini-eggs, popcorn, wine gums and, now, toffees. Its strategy is to acquire and bolt together a string of food companies, with the aim of becoming a £100m group within five years. The current market capitalisation is £22m. Buy the shares, sweet-tooth .


Aggregate Industries, the quarries group, is a financially robust, cash-generative company with business split almost 50-50 between government-sponsored projects and private housebuilding or commercial construction. Bad weather or economic trouble can sometimes knock it off course temporarily, but gradual expansion in the US adds enough to make the stock interesting as a long-term investment proposition. It's shares are a screaming hold.


With the Government and even the BBC driving efforts to promote health, fitness and weight loss in Britain, LA Fitness, the only health club chain listed on the stock market, stands to gain. News that UK consumers have racked up £1 trillion of debts might make some reconsider the value of their under-used gym memberships. A run in the park is free, after all. But there is still an increasing number of people for whom going to the gym has become part of their routine. Hold.


Long-suffering investors in ICI, the chemicals giant, have just been rewarded with a dividend rise - the first since 1996. But now, the key problem for ICI is rising raw material costs. It is heavily dependent on oil prices, which show no sign of falling, and there is no certainty it will be able to fully pass these higher costs on to customers. Avoid.

Why Vodaphone?

Vodafone is the largest mobile phone company in the world. But why?

This great British success story has 140 million customers in 26 countries across five continents. Yet the stock market is taking a sceptical view of the company's prospects, asking "why?" all the time. What is the point of this "global footprint"? More specifically, why is there more value in a multi-national collection of telecoms businesses, than there would be in the businesses separately?

Valid questions, but they can be answered positively. There are some cost benefits of being a global operator, in terms of buying network equipment or content for new entertainment and information services such as Vodafone live!. The company promises to put a figure to these benefits later this year. As long as management remains devolved to the individual countries, Vodafone need not be slow to respond to changing local tastes or challenges.

These issues should not be allowed to obscure the main point for potential investors: Vodafone has cashflows of £8bn-plus a year and is starting to hand a good portion of this back to shareholders.

There is downward pressure on mobile phone charges already thanks to the entry of new competitors and the actions of regulators. This will get worse as third generation networks go live, but more cash will keep rolling in than Vodafone could possibly invest.

Meanwhile, with services such as Vodafone live! and products for connecting laptops to the internet, Vodafone has invested in the future. These shares should be in every long-term investor's portfolio.

The above is a selection from the daily Investment Column

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