DineEquity Inc (DIN), Darden Restaurants, Inc. (DRI): These Sit-Down Restaurants Offer Big Plates of Profits

Cranking up the shareholder rewards

Not only is DineEquity Inc (NYSE:DIN) changing its underlying business model, but the company is also overhauling its capital allocation program. DineEquity Inc (NYSE:DIN) recently instituted a generous dividend policy, in addition to a new $100 million share buyback program.

After suspending its dividend payments in 2008 in the middle of the Great Recession, the company now intends to pay $3 per share annually to shareholders, which amounts to an impressive 4.3% yield at recent prices.

For its part, Darden Restaurants, Inc. (NYSE:DRI) announced a dividend increase along with its fourth-quarter and full year results. The company raised its shareholder payout by 10% to $2.20 per share annualized. At recent levels, Darden Restaurants, Inc. (NYSE:DRI) now yields 4.3% as well.

Brinker International, Inc. (NYSE:EAT), meanwhile, is a lower-yielding stock but has demonstrated greater dividend growth in recent years than its rivals. Brinker International, Inc. (NYSE:EAT)’s last dividend bump was a generous 25%, and it’s likely the company will grow it again in time for its next dividend payment.

In the end, while each of these restaurant stocks is highly profitable and pays a solid dividend, DineEquity Inc (NYSE:DIN) appears to be the winner. Not only does the stock offer a dividend yield in excess of 4%, but the company is very cheap at current levels. A likely cause of this is the company’s recent profit woes, but that’s due largely to the current transition taking place to the franchise model.

Those expenses will abate in time, so for investors with a long-term view, future returns are compelling. Moreover, you’re being paid handsomely to wait until these changes materialize. As a result, DineEquity looks like a great stock to buy at recent prices.

Robert Ciura has no position in any stocks mentioned. The Motley Fool owns shares of Darden Restaurants. Robert is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article These Sit-Down Restaurants Offer Big Plates of Profits originally appeared on Fool.com is written by Robert Ciura.

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