The Retail Food Group Limited (ASX: RFG) share price has fallen 16% in the past 12 months to $4.63, with a high of $7.37 and a low of $4.47 along the way.
Today, the company offers a 6.3% dividend and a modest price of around 11x forecast full year earnings. Retail Food Group reduced its profit growth guidance yesterday, following the underperformance of two of its franchises, Pizza Capers and Michel's Patisserie.
The company has been sold off heavily over more generalised fears about its franchise model, and the defensiveness (or otherwise) of its earnings in the event of an economic downturn in Australia.
While the risks are real, Retail Foods also has a well-developed plan to grow its franchise numbers both here and internationally. Over the next few years, I expect that the Australian operations that are so worrying for the market at present will become less relevant.
With a 6% fully-franked dividend (likely to increase somewhat this year) and reasonable prospects of growth over the next 5 years, I continue to hold my Retail Food Group shares.
