Wingstop Stock Has Major Potential as a Dividend Play

Restaurant chain Wingstop Inc. (NASDAQ:WING) continues to expand its franchise locations, announcing the opening of its 1500th location in November 2020. In the company’s statement, Wingstop noted an increase in net new openings, going from 120-130 to now 135-140 net new openings for 2020.

So far in 2020, Wingstop stock has flown to a 73% gain. While the shares are a ways off their Aug. 24 all-time high of $163.59, their 200-day moving average contained the subsequent pullback. 

What's more, traders looking to speculate on WING's near-term trajectory should consider options. The stock's Schaeffer's Volatility Index (SVI) of 44% is in just the 9th percentile of its annual range, suggesting short-term options are pricing in relatively low volatility expectations for the shares. In other words, Wingstop's near-term options are attractively priced at the moment.

Investors should note that Wingstop has shown incredible fundamental growth in just the past few years. The company has grown its annual revenue by more than 250% and more-than-doubled its net income since 2016. A large part of that growth has come in 2020 amid a global pandemic that has hit the restaurant industry hard. Despite the obstacles laid out for restaurant chains this year, Wingstop added nearly $40 million to its revenue and $17 million to its net income.

Wingstop does carry a balance sheet with negative equity and considerably more debt than cash. Although that shouldn’t come as a surprise, with the company’s current focus on expanding its locations. What is a bit surprising is Wingstop stock’s high price-to-earnings ratio of 130.71. Even WING's forward price-to-earnings might seem a bit exaggerated at 89.29. However, at a market cap of just $4.27 billion, there is still plenty of room for WING stock price to increase over the coming years, especially if it continues at its current growth rate.

Wingstop stock is looking like an intriguing dividend play despite its low yield of 0.38%, with a forward dividend of $0.56. WING most recently paid a quarterly dividend of $0.14 and a special dividend payment of $5.00 per share. In Wingstop stock's short dividend history that began in 2016, WING has already paid special dividends on four different occasions, averaging one payment every year.

Wingstop stock will be closing out 2020 having paid $5.50 per share in dividends, which comes at a yield of about 3.8%. Aside from the nice appreciation in WING stock price, Wingstop stock could become a massive dividend stock if it accomplishes the expansion plans that are already in the works and paying off.