Want to participate in a research study? Help shape the future of investing tools and earn a $60 gift card!
Attention dividend hunters! Darden Restaurants, Inc. (NYSE:DRI) will be distributing its dividend of US$0.75 per share on the 01 May 2019, and will start trading ex-dividend in 4 days time on the 09 April 2019. What does this mean for current shareholders and potential investors? Below, I will explain how holding Darden Restaurants can impact your portfolio income stream, by analysing the stock's most recent financial data and dividend attributes.
How I analyze a dividend stock
When assessing a stock as a potential addition to my dividend Portfolio, I look at these five areas:
- Is it the top 25% annual dividend yield payer?
- Has it consistently paid a stable dividend without missing a payment or drastically cutting payout?
- Has the amount of dividend per share grown over the past?
- Is is able to pay the current rate of dividends from its earnings?
- Will it have the ability to keep paying its dividends going forward?
Does Darden Restaurants pass our checks?
The current trailing twelve-month payout ratio for the stock is 52%, which means that the dividend is covered by earnings. Going forward, analysts expect DRI's payout to remain around the same level at 55% of its earnings. Assuming a constant share price, this equates to a dividend yield of 2.8%. Furthermore, EPS should increase to $6.29.
When assessing the forecast sustainability of a dividend it is also worth considering the cash flow of the business. Companies with strong cash flow can sustain a higher payout ratio, while companies with weaker cash flow generally cannot.
If there is one thing that you want to be reliable in your life, it's dividend stocks and their constant income stream. DRI has increased its DPS from $0.80 to $3 in the past 10 years. During this period it has not missed a payment, as one would expect for a company increasing its dividend. This is an impressive feat, which makes DRI a true dividend rockstar.
In terms of its peers, Darden Restaurants has a yield of 2.5%, which is on the low-side for Hospitality stocks.
With these dividend metrics in mind, I definitely rank Darden Restaurants as a strong income stock, and is worth further research for anyone who considers dividends an important part of their portfolio strategy. Given that this is purely a dividend analysis, I recommend taking sufficient time to understand its core business and determine whether the company and its investment properties suit your overall goals. There are three key factors you should further research:
- Future Outlook: What are well-informed industry analysts predicting for DRI’s future growth? Take a look at our free research report of analyst consensus for DRI’s outlook.
- Valuation: What is DRI worth today? Even if the stock is a cash cow, it's not worth an infinite price. The intrinsic value infographic in our free research report helps visualize whether DRI is currently mispriced by the market.
- Other Dividend Rockstars: Are there better dividend payers with stronger fundamentals out there? Check out our free list of these great stocks here.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.