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Analysts Are Expecting Darden’s Dividends to Rise in 2017

Ralph Nathan

What’s Cookin’ for Darden Restaurants: 3Q16 Earnings and Outlook

(Continued from Prior Part)

Dividends

During the first three quarters of fiscal 2016, Darden Restaurants (DRI) has paid dividends of $1.6 per share with $0.5 in 3Q16. In 4Q16, analysts are expecting the company to pay $0.55, which brings the total dividend for fiscal 2016 to $2.15, a decline of 2.2% from 2015 dividends. In fiscal 2017, analysts are expecting the company to raise its dividends to $2.4 from $2.15 in 2016, a growth of 13.5%.

Dividend yield

A company’s dividend yield indicates how much a company pays out in dividends each year relative to its share price. For the next 12 months, analysts are expecting Darden’s dividend yield to be at 3.3% while its peers Texas Roadhouse (TXRH), Bloomin’ Brands (BLMN), and Brinker International (EAT) are expected to have dividend yields of 1.9%, 1.9%, and 3.1%, respectively, for the next 12 months.

Capital allocation

Apart from dividends, Darden, which forms 0.14% of the holdings of the iShares Russell Mid-Cap ETF (IWR), also rewards its shareholders with share repurchases or buybacks. On December 16, 2015, Darden’s board of directors authorized a share repurchase program through which the company can buy up to $500 million worth of shares. During the first three quarters of 2016, the company has purchased shares worth $140 million, which leaves $360 million under the share repurchase program. Before this, the board of directors had authorized the share repurchase of 187.4 million outstanding shares. The repurchase reduces the number of shares outstanding, thus increasing the earnings per share.

In the next article, we will discuss the valuation multiple of Darden Restaurants.

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