Darden: 3.2% Dividend Yield, Olive Garden Unit on the Mend

Darden Restaurants (DRI) is one of the cheaper restaurant stocks around. And though some of its fundamentals are weaker than its peers, it has a superior dividend yield and its Olive Garden unit is finally showing improved results.

Darden's stock has not enjoyed the type of rise seen by fast food market leaders McDonald's (MCD), YUM Bands (YUM), Chipotle Mexican Grill (CMG) and Tim Horton's (THI) over the past several years - though it's outperformed the owner of Chilli's Grill & Bar, Brinker International (EAT), and the S&P 500.

Olive Garden is Darden's biggest chain and has been a drag on results. Red Lobster and LongHorn Steakhouse have been posting much stronger same-store sales.

Darden Restaurants Stock Chart

Darden Restaurants Stock Chart by YCharts

There are several good reasons for Darden's relative underperformance. The owner of Red Lobster and the upscale Capital Grille has by far the lowest profit margins of the group.

Darden Restaurants Profit Margin Chart

Darden Restaurants Profit Margin Chart by YCharts

And Darden has the weakest earnings per share growth over the past year.

Darden Restaurants Earnings Per Share TTM Chart

Darden Restaurants Earnings Per Share TTM Chart by YCharts

But Darden’s dividend yield is attractive. And with the Olive Garden posting the first year-over-year same-store sales growth in more than a year in the third quarter, which ended Feb. 26, now may be the time for bottomless salads again.

Darden Restaurants Dividend Yield Chart

Darden Restaurants Dividend Yield Chart by YCharts

Michael McHugh is an editor for the YCharts Pro Investor Service which includes professional stock charts, stock ratings, stock screener and portfolio strategies.

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