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3 Buy the Dip Restaurant Stocks That Pay Dividends

The restaurant industry is well-positioned for a solid rebound. Therefore, amid heightened market volatility on concerns about looming interest rate hikes, we think it could be wise to bet on dividend-paying restaurant stocks Darden Restaurants (DRI), Dine Brands (DIN), and Ruth’s Hospitality (RUTH) to ensure a steady portfolio income stream. Read on.

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), Dine Brands Global, Inc. (DIN), and Ruth’s Hospitality Group, Inc. (RUTH), which have each suffered price dips lately.

Darden Restaurants, Inc. (DRI)

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)

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: Applebee’s Franchise Operations; IHOP Franchise Operations; Rental Operations; Financing Operations; and Company-Operated Restaurant Operations. It owns and operates more than 3500 franchise restaurants across 17 countries.

This month, DIN announced plans to open the first IHOP restaurant in Nassau, the Bahamas. It is scheduled to open in late 2022. Regarding this, DIN Regional VP of Franchise Operations William Urrego said, “The Caribbean is an important growth market for Dine Brands, and [its] well-developed tourism infrastructure and recent large-scale hotel and resort investments, as well as shopping center developments, help position it as the perfect location for IHOP’s first restaurant in the Island.”

In November, DIN announced its first virtual IHOP location in Toronto, Canada, in partnership with Ghost Kitchens Brands. Given the rising popularity of off-premises dining, the virtual IHOP is expected to rake in substantial revenues through on-site ordering, takeout, and delivery.

In its fiscal 2021 third quarter, ended September 30, DIN’s total revenues increased 29.5% year-over-year to $228.72 million. DIN’s gross profit increased 41.7% year-over-year to $94.60. Its consolidated adjusted EBITDA rose 48.2% from the same period last year to $63.30 million. Its net income increased 130.7% from its year-ago value to $23.11 million. And the company’s adjusted earnings per share increased 93.8% from its year-ago value to $1.55.

DIN pays $1.60 as dividends annually, yielding 2.26% at its current share price.

Analysts expect DIN’s revenue for its fiscal third quarter of 2022 to come in at $2.55 billion, representing a 47.0% rise year-over-year. The Street expects the company’s EPS for the to-be-reported quarter to come in at $2.14, representing a 118.6% increase year-over-year.

Shares of DIN declined 17.6% in price over the past month to close the last trading session at $67.68.

DIN has an overall B rating, which translates to Buy in our POWR Ratings system. It also has a B grade for Growth, Value, and Quality. It is ranked #3 of 44 stocks in the Restaurants industry. Click here to see DIN Ratings for Momentum, Stability, and Sentiment.

Ruth’s Hospitality Group, Inc. (RUTH)

RUTH is a leading fine dining steak house company in the U.S. The Winter Park, Fla.-based company develops, operates, and franchises fine dining restaurants through its subsidiaries. RUTH has more than 150 restaurants, 74 company-owned restaurants, 72 franchisee-owned restaurants, and 21 international franchisee-owned restaurants.

Last December, RUTH opened a new restaurant in Lake Grove, New York. It is the company’s 151st restaurant and brings an exclusive dining experience to the area. The company’s expansion of business by opening new restaurants might attract a new customer base in new markets, increase market influence, and generate more revenue.

Last October, RUTH announced its holiday offerings, including in-restaurant holiday menus and pre-ordering and pick-ups at locations nationwide. This holiday marketing is expected to benefit RUTH by increasing customer engagement with its restaurant outlets, securing sales, and boosting revenues.

In its fiscal year 2021 third quarter, ended Sept. 26, 2021, RUTH’s total revenues increased 64.3% year-over-year to $104.19 million. Its net income rose 556.1% from the prior-year quarter to $6.96 million. In addition, the company’s earnings per share increased 600% from the year-ago value to $0.20.

RUTH pays $0.48 in dividends annually, yielding 2.46% on its current share price.

RUTH’s revenues are expected to improve 59.57% year-over-year to $123.46 million for the to-be-reported quarter ended December 31, 2021. Analysts expect RUTH’s EPS for the fiscal fourth quarter to be $0.25, representing a 726.7% rise year-over-year. The company has an impressive earnings surprise history: it surpassed the consensus EPS estimates in each of the four trailing quarters.

Over the past month, RUTH’s shares declined 3.5% in price to close the last trading session at $19.55.

RUTH’s strong fundamentals are reflected in its POWR Ratings. The company has an overall B rating, which translates to Buy. RUTH has an A grade for Growth and a B grade for Value and Quality. Among the 44 stocks in the Restaurants industry, it is ranked #1. Click here to see the additional POWR Ratings for Momentum, Sentiment, and Stability for RUTH.


DRI shares were unchanged in premarket trading Wednesday. Year-to-date, DRI has declined -8.04%, versus a -8.52% rise in the benchmark S&P 500 index during the same period.

About the Author: Mangeet Kaur Bouns

Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.


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