Brinker International (EAT) Enhances Shareholder Wealth


Brinker International, Inc.’s (EAT) board of directors recently approved an increase in its quarterly dividend to 28 cents per share and also authorized the purchase of up to an additional $350 million of its common stock under the share repurchase program. This move reflects the company’s strong performance and program execution capability.

The dividend hike marks a 17% increase from the current payout of approximately 24 cents per share. The proposed hike would bring the annual dividend to $1.12. The increased quarterly dividend will be paid on Sep 25, 2014 to shareholders of record at the close of business on Sep 5, 2014.

With the current annual dividend rate of $1.12 and the current price of $48.67 (as of Aug 21, 2014), the company has a dividend yield of approximately 2.3%.

This is the fourth consecutive dividend increase since Brinker International began paying quarterly dividends in Nov 2010.  In Aug 2013, Brinker hiked its quarterly dividend by 20% to 24 cents per share. Earlier, in 2012 and 2011, the company raised the dividend by a respective 25% and 14%.

The company has been repurchasing its common stock for the last couple of quarters. In Aug 2013, the company infused an additional $200 million into its share buyback program. As per the new share repurchase program, the company is permitted to repurchase up to an additional $350 million of the company’s common stock. This will bring the company’s share repurchase authorization to $3.9 billion.

Brinker is not the only company in the restaurant sector paying attractive dividends. Another sector behemoth, McDonald’s Corp. (MCD) has a history of increasing dividends every year since the inception of its dividend payout program in 1976. Yum! Brands Inc. (YUM) has also been raising its dividend over the last few years, irrespective of economic peaks and valleys. Both these companies last increased their dividends in Sep 2013.

Brinker’s financial position remains stable. It generates sufficient free cash flow to return capital to shareholders that boosts investors’ confidence in the stock. During the recently concluded fiscal fourth quarter of 2014, the company repurchased 0.9 million shares for approximately $47.8 million. At year-end, the company had current assets of $210.9 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 #4 (Sell). BJ's Restaurants, Inc. (BJRI) is a better-ranked stock in the same sector with a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on YUM
Read the Full Research Report on BJRI
Read the Full Research Report on MCD
Read the Full Research Report on EAT

Zacks Investment Research

View Comments (0)