Cheap Dividend Stocks #1: Wendy’s (WEN)
Share Price as of 4/4: $9.11
YTD Stock Performance: 4%
Dividend Yield: 2.2%
Among cheap stocks, Wendy’s (WEN) doesn’t have an amazing dividend yield. It’s 2.2%, which is merely OK.
What WEN stock does have going for it is more upside to come.
After years of struggling, Wendy’s finally went all-in on a new model. It’s selling company-owned restaurants and transforming itself into an operator of franchises. The franchise model means more earnings, more return on equity, more revenue from rents and royalties, and more free cash. (Owning restaurants is capital-intensive.)
Wendy’s most recent quarterly results were mixed. Earnings of 11 cents a share beat the Wall Street estimate by 2 cents, but revenue came up short. The good news is that early returns from the transformation program appear to be working as Wendy’s reins in costs, and that should soon benefit WEN stock.
Additionally, Wendy’s can use some of the cash freed up by the franchise model to invest in advertising and marketing, and that should boost customer traffic.