Retail

Food Chains That Will Challenge the McDonald’s Dividend (DRI, EAT, MCD, PFCB, YUM, BAGL)

The world of casual dining and dining is one which has survived bad times and thrived in good times.  It turns out that some of the casual dining segment, particularly the fast food segment, offers investors a defensive stock strategy.  After all, people have to eat and this offers value to consumers.

It is widely believed that McDonald’s Corporation (NYSE: MCD) is the king of the food sector when it comes to being defensive because of its product mix and because of its high dividend.  There are actually many other restaurant chains, some fast food and some casual dining to upscale dining, that offer close to the same sort of dividend for investors.

Our dividend screen identified the shares of six companies.  Among these companies, the highest dividend is almost 3.5%.  The lowest yielding restaurant company pays a dividend exceeding 1.8%.  Returns of equity (ROE) range from an attractive 16.7% to an eye-catching high exceeding 83%.  Except where otherwise noted, the source for all performance and financial data is Finviz.com.

Listed in alphabetical order of their ticker symbols the six restaurant chains are: Darden Restaurants, Inc. (NYSE: DRI), Brinker International Inc. (NYSE: EAT), McDonald’s Corp. (NYSE: MCD), P.F. Chang’s China Bistro, Inc. (NASDAQ: PFCB), Yum! Brands, Inc. (NYSE: YUM), and Einstein Noah Restaurant Group, Inc. (NASDAQ: BAGL).

Darden Restaurants, Inc. (NYSE: DRI) pays a 2.7% dividend with an earnings to dividend payout ratio of 36.7%. The company’s return of equity (ROE) is an attractive 24%. Its forward PE of 12.3 is the lowest among these six restaurant chains.  In Thursday trading, Darden’s shares closed at $46.86, down 0.32%.  Its 52-week price range is $36.27 to $52.12.   Red Lobster and Olive Garden are two of the brands here that have helped lead the charge.

Brinker International Inc.  (NYSE: EAT) pays a 2.4% dividend with an earnings payout ratio of 35.1%.  Its forward PE is 13.1 and its ROE is nearly 25%.   Brinker International shares closed at $23.20 on Thursday, down 0.56%. Its 52-week range is $13.69 to $25.96. Having Chili’s and Maggiano’s pays off and there appears to be enough earnings power here for that dividend to go higher.