Brinker International Inc. (EAT - Analyst Report) recently hiked its quarterly dividend by 4 cents to 24 cents per share, reflecting a 20.0% increase from the prior dividend payout. This equates to an annual payout of 96 cents per share. The increased dividend will be paid on Sep 26, 2013, to stockholders of record as of Sep 6.
Brinker, the parent company of Chili's and Maggiano’s, has a consistent track record of paying dividends and the latest hike brings the forward annual dividend yield, as of Aug 22, 2013, to 2.32%. The current hike comes exactly after a year of its prior dividend hike announced in Aug 2012 (from 16 cents to 20 cents, which was paid on Sep 27, 2012). Prior to that, Brinker had increased its quarterly dividend by 14% in Aug 2011 and 27% in Mar 2010. Brinker continues to target a 40% dividend payout ratio.
Brinker is not the only company in the restaurant sector paying attractive dividends. Another sector behemoth, McDonald’s Corp. (MCD - Analyst Report) has a history of increasing dividends every year since the inception of its dividend payout program in 1976. In fact, Brinker’s forward annualized dividend yield of 2.32% lags the current dividend yield (3.23%) of McDonald’s. Another operator Yum! Brands Inc. (YUM - Analyst Report) has also been raising its dividend over the last few years, irrespective of economic peaks and valleys.
This Texas-based restaurant chain also enhances shareholder value through a share buyback program. Along with the dividend hike, the company extended its share buyback program by an additional $200 million. The latest authorization brings the total outstanding share repurchase amount to $480 million as of Aug 22. The company has been repurchasing its common stock consistently for the last couple of quarters.
Brinker’s financial position remains stable. It generates sufficient free cash flow to return capital to shareholders. During the recently concluded fourth quarter of 2013, the company repurchased 3.5 million shares for approximately $141.6 million. At year-end, the company had current assets of $198.6 million.
We appreciate Brinker’s efforts to consistently enhance long-term shareholder value even amid a volatile economic condition. We believe that a continuous increase in dividend payment affirms the company’s optimistic outlook and indicates strong future growth.
Brinker currently carries a Zacks Rank #3 (Hold). Another player in the restaurant industry, which looks attractive at current levels, is Burger King Worldwide Inc. , carrying a Zacks Rank #2 (Buy).