Here’s why Retail Food Group Limited shares are a BARGAIN

Retail Food Group Limited (ASX: RFG) is cheap, has a huge dividend yield and is growing rapidly.

Indeed, the owner of Donut King, Gloria Jeans, Pizza Capers and much more, today announced yet another upgrade to profit guidance.

In an announcement to the ASX, Retail Food’s CEO, Tony Alford, said, “Notwithstanding the successful execution of an ambitious development program throughout the entirety of FY15, there remains a vast array of opportunity within reach for the Company.”

While the market appears unenthused by Retail Food’s blockbuster track record in the face of a slowing economy, Mr Alford remains bullish – and is on the prowl for new opportunities.

“It is not RFG’s intention to remain idle in the face of such opportunity, and as such, the Company is in pursuit of additional revenue drivers able to deliver enhanced and sustainable shareholder outcomes which underpin long term growth,” Mr Alford said.

At its Annual General Meeting today, the company reinforced its expansion into the giant global coffee market, announced a push into the coffee capsule market and upped the group’s 2016 financial year profit guidance.

Despite reaffirming its profit growth target of 20% over FY16, Retail Food today said it expects first-half underlying profit growth of 25%, but on a ‘like for like’ basis profit growth is expected to be 35%.

Buy, Hold or Sell?

Retail Food Group’s share price has now fallen 38% in six months. However, at today’s share price it trades on a forecast price-earnings ratio of just 10x and a dividend yield of 6.22% fully franked. That’s 8.88% grossed-up for those tax-effective franking credits!

While the short-term economic outlook is a little cloudy, Retail Food’s quality brands, cheap shares, growing international business and huge dividend yield make it a bargain in my book.

Get our #1 dividend stock idea

Retail Food Group is a BUY in my book, but Scott Phillips, lead advisor of Motley Fool Share Advisor, has just announced his #1 dividend stock of 2015-2016 - I think it is a GREAT BUY today! Best of all, for a limited time, Scott is giving away its name and stock code free in his brand-new investment report! Simply click here, enter your email address and we'll send you his report.

Motley Fool contributor Owen Raskiewicz owns shares of Retail Food Group Limited.

Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.