Yahoo Finance Darden Restaurants (NYSE:DRI) Is Paying Out A Larger Dividend Than Last Year
The board of Darden Restaurants, Inc. (NYSE:DRI) has announced that it will be paying its dividend of $1.40 on the 1st of August, an increased payment from last year's comparable dividend. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.
View our latest analysis for Darden Restaurants
Darden Restaurants' Dividend Is Well Covered By Earnings
We like to see robust dividend yields, but that doesn't matter if the payment isn't sustainable. The last dividend was quite easily covered by Darden Restaurants' earnings. This means that a large portion of its earnings are being retained to grow the business.
The next year is set to see EPS grow by 37.1%. If the dividend continues along recent trends, we estimate the payout ratio will be 49%, which is in the range that makes us comfortable with the sustainability of the dividend.
Dividend Volatility
The company has a long dividend track record, but it doesn't look great with cuts in the past. The dividend has gone from an annual total of $2.20 in 2014 to the most recent total annual payment of $5.60. This works out to be a compound annual growth rate (CAGR) of approximately 9.8% a year over that time. We like to see dividends have grown at a reasonable rate, but with at least one substantial cut in the payments, we're not certain this dividend stock would be ideal for someone intending to live on the income.
Darden Restaurants Could Grow Its Dividend
With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. Darden Restaurants has seen EPS rising for the last five years, at 8.2% per annum. Since earnings per share is growing at an acceptable rate, and the payout policy is balanced, we think the company is positioning itself well to grow earnings and dividends in the future.
We Really Like Darden Restaurants' Dividend
Overall, a dividend increase is always good, and we think that Darden Restaurants is a strong income stock thanks to its track record and growing earnings. Distributions are quite easily covered by earnings, which are also being converted to cash flows. Taking this all into consideration, this looks like it could be a good dividend opportunity.
It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 2 warning signs for Darden Restaurants that investors should take into consideration. If you are a dividend investor, you might also want to look at our curated list of high yield dividend stocks.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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