Darden Restaurants Offers 2.7% Dividend Yield, 30% One-Year Total Return (DRI)
By: Ned Piplovic,
Darden Restaurants, Inc. (NYSE:DRI) raised its annual dividend 12 out of last 14 consecutive years, provided its shareholders with a total return of nearly 30% over the past year and currently pays a 2.7% yield, which exceeds the average industry yield by more than 40%.
In addition to the above-average yield, the other component that drove the high total return is the considerable asset appreciation of more than 28% over the last 12 months. The company’s next ex-dividend date will occur on January 9, 2018, and the pay date will be approximately three weeks later on February 1, 2018.
Darden Restaurants, Inc. (NYSE:DRI)
Founded in 1968 and based in Orlando, Florida, Darden Restaurants, Inc., through its subsidiaries, owns and operates full-service restaurants in the United States and Canada. As of June 27, 2017, the company owned and operated approximately 1,700 restaurants under the Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze and Eddie V’s brands. In its quarterly earnings call on December 19, 2017, the company’s management announced that in the most recent quarter total sales rose 14.6%, with same-restaurant comparable sales growing 3.1%. Adjusted diluted earnings per share grew 14.1% to $0.73. Additionally, the company distributed $78 million in dividends to its shareholders and repurchased $89 million worth of its shares.
The company’s current $0.63 quarterly dividend is 12.5% higher than it was in the same period last year. This current quarterly payout converts to a $2.52 annualized distribution and currently yields 2.7%. That 2.7% yield level outperformed the 1.86% average yield of the Services sector by 42% and exceeds the $1.68% average yield of Darden Restaurants’ peers in the Restaurants segment by 57%.
The company’s current streak of consecutive dividend boosts is only two years. In 2015, Darden Restaurants paid the same $2.20 annual payout as it did in 2014 and then cut the annual distribution amount 3.6% to $2.12 in 2016. However, 2016 was the only dividend cut that the company made since it started paying dividends in 1995.
Before stalling the annual dividend hikes in 2015, the company raised annual dividends for 10 consecutive years between 2004 and 2014. Even with the flat annual dividend payout in 2015 and the slight dividend reduction in 2016, the company managed to grow its annual dividend payout at an average rate of almost 28% per year since 2004.
The result of a compounded growth at such a high rate is that the current annualized dividend distribution for 2018 is 31.5 times higher than the total annual dividend paid in 2004. Even if we only consider the current two-year streak of dividend hikes, the company still managed a dividend growth rate of 9% per year.
The share price reached its 52-week low of $71.55 after it dropped almost 4% between December 22, 2016, and January 6, 2017. After the early-January low, the share price rose nearly 30% and reached $92.69 on June 27, 2017. However, the share price reversed course immediately and dipped 17% to $77.05 by September 7, 2017. After that drop, the share price reversed trend again and ascended more than 24% by December 20, 2017, when the share price reached its new all-time high. The share price pulled back 0.6% in the next day of trading and closed on December 21, 2017, at $95.06, which is 27.6% higher than its was one year ago, 32.9% higher than the 52-week low from early January and almost 140% higher than it was five years ago.
The combination of rising dividend income and steady capital growth rewarded Darden Restaurants’ investors with a 29.5% total return over the last 12-months, a 99% return over the past three years and a 162% total return over the last five years.
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Ned Piplovic is the assistant editor of website content at Eagle Financial Publications. He graduated from Columbia University with a Bachelor’s degree in Economics and Philosophy. Prior to joining Eagle, Ned spent 15 years in corporate operations and financial management. Ned writes for www.DividendInvestor.com and www.StockInvestor.com.