3 Buy the Dip Restaurant Stocks That Pay Dividends

Last week was the worst week for the stock market since the onset of the COVID-19 pandemic. The S&P 500 and Nasdaq Composite have declined 3.9% and 5.6%, respectively, over the past five trading days, and the Dow Jones Industrial Average has declined 2.1% over that period.

The markets are expected to remain under pressure in the near term due to worsening political tensions, an ongoing tech sell-off, and impending interest rate hikes. Therefore, investing in fundamentally sound dividend-paying stocks could be a good strategy now. Companies offering high dividends tend to have stronger cash flows and can provide investors with regular income while the stock market fluctuates. Therefore, these stocks tend to be less volatile and comparatively reliable.

Because the restaurant industry is expected to witness a solid rebound amid strong consumer spending, we think it could be wise to invest in renowned dividend-paying restaurant stocks Darden Restaurants, Inc. (DRI – Get Rating), Dine Brands Global, Inc. (DIN – Get Rating), and Ruth’s Hospitality Group, Inc. (RUTH – Get Rating), which have each suffered price dips lately.

Darden Restaurants, Inc. (DRI – Get Rating)

DRI in Orlando, Fla., owns and operates full-service restaurants in the U.S. and Canada. Darden’s family of restaurants features successful brands in full-service dining that includes Olive Garden, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze, and Eddie V’s. The company owns more than 1,800 restaurants.

DRI’s net sales increased 37.2% year-over-year to $2.27 billion in its fiscal second quarter, ended Nov. 28, 2021. DRI’s earnings from continuing operations grew 99.6% year-over-year to $193.40 million. And its net earnings improved 101.3% year-over-year to $193.20 million. The company’s EPS increased 102.7% from its year-ago value to $1.48.

DRI pays $4.40 in dividends annually, yielding 3.2% on its current share price. The company’s dividends have increased at a 13.9% rate over the past five years.

A $2.55 billion consensus revenue estimate for the fiscal third quarter, ending Feb. 28, 2022, represents 47% year-over-year growth from the same period last year. A $2.14 consensus EPS estimate for its fiscal third quarter indicates 118.6% year-over-year growth from the same period in 2021. And DRI has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of all the trailing four quarters.

Over the past month, the stock has declined 7.6% in price to close the last trading session at $137.50.

DRI’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.

DRI has a B grade for Growth and Quality. Within the B-rated Restaurants industry, it is ranked #10 of 44 stocks. To see additional POWR Ratings (Momentum, Value, Stability, and Sentiment) for DRI, click here.

Dine Brands Global, Inc. (DIN – Get Rating)

DIN in Glendale, Calif., is a leading full-service dining company that owns, franchises, and operates restaurants internationally. The company is the franchisor of Applebee’s Grill+Bar and IHOP. It operates in five segments…

 

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