If you're busy constructing a retirement portfolio, then you may be on the lookout for some high quality ASX dividend shares to buy. One unstoppable ASX dividend share that I believe could act as the foundation to build a portfolio around is Domino's Pizza Enterprises Ltd (ASX: DMP).
Domino's Pizza Enterprises is the largest Domino's franchisee outside of the United States. It holds the master franchise rights to the Domino's brand and network in Australia, New Zealand, Belgium, France, the Netherlands, Japan, Germany, Luxembourg, Denmark and Taiwan. At the end of FY 2022, the company had a network of approximately 3,400 stores.
Why could it be a dividend share to buy?
Prior to FY 2022, Domino's had increased its dividend each year for over a decade. And were it not for the pandemic and the war in Ukraine, this stellar run would likely be continuing today. However, unfortunately, inflationary pressures have hit the company hard and weighed on its performance and margins over the last 12 months.
The good news is that the headwinds the company is facing won't be around for long. Furthermore, management recently revealed it believes the company's sales performance will be back in line with medium-term targets by the end of the current financial year.
In light of this, I think now would be a good time for investors to consider adding this dividend share to their retirement portfolio. Especially with the Domino's share price falling so heavily this year, as you can see below.
This decline means that the short-term dividend yields on offer with Domino's shares are now quite reasonable. For example, Morgans is forecasting partially franked dividends per share of $1.55 in FY 2023 and $1.89 in FY 2024. Based on the current Domino's share price, this equates to yields of 2.4% and 2.9%, respectively.
But I wouldn't be buying Domino's shares for its short-term yields. I would be buying and holding this ASX dividend share for the potential long-term yields.
Long term outlook
Domino's has grown its store network materially over the last decade and is aiming to do it all over again. Over the next 10 years, it aims to more than double the size of its network, before acquisitions, to 7,250 stores.
Ceteris paribus, more than doubling your store network would more than double your existing sales. But Domino's isn't settling for that. It has set itself an annual same-store sales growth target of 3% to 6%.
And if it can deliver margin improvements over the next decade, I believe it is conceivable that, combined with new store openings and solid same-store sales growth, Domino's could triple its earnings and dividend over the next decade.
Based on FY 2022's dividend of $1.56 per share, that would mean a dividend of $4.68 per share. Which equates to a dividend yield of approximately 7.3% based on current levels.
Together with the potential share price gains over the period, I think this makes Domino's an ASX dividend share to buy for the long term.
