3 Best Dividend-Paying Restaurant Stocks to Buy Now
By: Jonathan Wolfgram,
The three best dividend-paying restaurant stocks to buy now include multinational burger companies and a surprising hot dog vendor.
While the restaurant industry took a hit last year from the COVID-19 pandemic, a few companies with strong financials and adaptable business models weathered the storm and came out turning a profit. When analyzing restaurant stocks, the companies with the most disposable income for dividend distributions are in the fast food industry and based in the United States.
3 Best Dividend-Paying Restaurant Stocks to Buy Now, According to DividendInvestor.com
These stocks were found and analyzed through our very own Dividend Screener on the Dividend Investor website. The Dividend Screener is a simple web-based tool that allows investors to sift through thousands of potential equities by adding their own customized criteria to find stocks that fit their portfolio’s unique needs.
Also used in the analysis of the three best dividend-paying restaurant stocks to buy now was the platform designed by our partners at Stock Rover, offering a rigorous screening program to assess performance metrics for investors. To sign up for a free two-week trial, click here.
For the greatest ease of use and most comprehensive research, we recommend that savvy investors use both the Dividend Screener and Stock Rover in tandem.
Here are the three best dividend-paying restaurant stocks to buy now.
3 Best Dividend-Paying Restaurant Stocks to Buy Now #3:
McDonald’s Corporation (NYSE:MCD)
McDonald’s Corporation (NYSE:MCD), the single-largest owner-operator of restaurants in the world, reported nearly $100 billion in sales amongst its 39,000 stores in 119 countries during 2020. McDonald’s unique take on cheap fast food production arguably started the niche industry as we know it today.
Like most other restaurant stocks, MCD plummeted in March and April of 2020 but its share price has been climbing since then. McDonald’s share price has grown 32.1% during its recovery period in the trailing 12 months. Its long-term returns have more than doubled investors’ money in the last five years, totaling 112.4%. Charted below are the 12-month returns, alongside a 50-day moving average.
Chart provided by Stock Rover.
McDonald’s is classified as a Dividend Aristocrat, a prestigious title given to companies that have increased their dividend distribution for more than 25 consecutive years — McDonald’s run of raising its dividend recently passed 45 years.
MCD pays a quarterly dividend of $1.29 per share. This corresponds to a yield of 2.2% and an annual distribution of $5.16. The company is likely to increase this dividend in the fourth quarter of 2021, if history is any indication.
There are multiple catalysts for sales growth in 2021 — the most notable are the introduction of all-day breakfast and the company’s partnership with Uber (NYSE:UBER) and GrubHub (NYSE:GRUB) for food delivery. Due in part to these catalysts and just as much to McDonald’s larger embrace of technology, the company projects earnings per share (EPS) growth of at least 6% annually in the next five years.
A discounted cash flow (DCF) analysis using Stock Rover values one share of the company at $240.26, roughly 2% higher than its latest closing price of $234.58.
3 Best Dividend-Paying Restaurant Stocks to Buy Now #2:
The Wendy’s Company (NYSE:WEN)
The Wendy’s Company (NYSE:WEN) is another multinational burger chain operating primarily in the United States. The company gains revenue from sales at its own restaurants, as well as royalties, rent and fees from franchised operations.
The company has a one-year return of 25.5% and a five-year return of 125.2%. The trailing 12-month period has been charted below, alongside a 50-day moving average to clarify the general trend.
Wendy’s was forced to reduce its dividend in 2020 due to the COVID-19 pandemic, but it has maintained continuous payments and is gradually reestablishing its dividend to pre-crisis levels. The company currently pays a quarterly dividend of $0.09, equivalent to a dividend yield of 1.6% and an annualized distribution of $0.36.
The Wendy’s Company has, across the board, stellar financials. Expectedly, it shines brightest in the efficiency of day-to-day operations, with WEN ranking in the 90th percentile for most efficient companies in the restaurant industry. This high ranking is largely driven by the company’s operating margin, which currently stands at an impressive 16.7% and is only growing as the company further embraces technology alongside McDonald’s.
However, as wonderful as the stock seems, a discounted cash flow (DCF) analysis using Stock Rover labels the company as 9% overpriced. Savvy investors should wait to invest and buy at the first dip.
3 Best Dividend-Paying Restaurant Stocks to Buy Now #1
Nathan’s Famous (NASDAQ:NATH)
Nathan’s Famous (NASDAQ:NATH) is an American franchiser of fast food restaurants specializing in hot dogs. The original restaurant stands today at the Coney Island neighborhood of Brooklyn, but the company generates a significantly larger share of its revenue from the sale of hot dog products to foodservice operators and distributors.
The company has a one-year return of 19.7%, having made a full recovery from the economic downturn of March 2020. The trailing 12-month period has been charted below, alongside a 50-day moving average to clarify the general trend.
Chart provided by Stock Rover.
Nathan’s Famous is a fairly new dividend payer that initiated regular paying dividends in 2018. The company has kept its dividend distribution level since early 2019 at a quarterly $0.35 per share. This distribution yields 2.1% and gives investors an annualized take-home of $1.40 per share.
While NATH pays a nice dividend, the reason the company is attractive to investors is its overall efficiency. Similar to Wendy’s, Nathan’s Famous scores in the 89th percentile of restaurants. However, NATH’s operating margin is a home run — producing a stable margin of 33.5%, far beyond its competitors and making it one of the most profitable companies in its industry group.
A discounted cash flow (DCF) analysis using Stock Rover values the company at $69.13, roughly 4% higher than its latest closing price of $66.30.
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Jonathan Wolfgram is an editorial staffer who writes website content at Eagle Financial Publications. He graduated from the University of Minnesota with Bachelor’s degrees in Finance and Philosophy. Jonathan writes for www.DividendInvestor.com and www.StockInvestor.com.