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The last month has been pretty tough on investors. Analysts and "Cramericans" are quick to feel peachy about the market when things are going well, like most of the last two years. But when the market gets tested, as seen below, they lose their senses and predict the apocalypse.


(Click to enlarge)

As you can see the market totally sold off last May. I remember sitting in front of a Bloomberg screen during the infamous flash crash thinking my portfolio was ruined. This came two weeks after the BP (NYSE:BP) disaster; on top of European countries defaulting like it was going out of fashion. The market did not recover until September. Then we had a tough November and everyone was worrying about unemployment and holiday sales and why gold has been killin’ it. We’ve seen crazy volatility over the last month and a half as well. But this has been justified by extrinsic factors, like Egypt, Libya, and the earthquake in Japan.

Despite all this, I am not losing faith in the stock market; I would however consider repositioning my holdings into strong, safe sectors that treat their shareholders to guaranteed dividends. This article is going to focus on the best dividends in the restaurant industry. Yes, commodities have been rising, cutting into margins, but Americans need to eat and that includes trading down to fast foods. Also, these decreasing margins can be offset on both consumers and franchisers. The industry itself boasts stable companies with stable brands and relatively stable dividends. With that being said the screen includes the top 8 restaurants stocks with over $100 million in market cap. They run from lowest to highest in terms of yield.

YUM! Brands (NYSE:YUM)

Price

Market Cap

Price to Earnings

Div Yield

$51.90

$24.26 Billion

21.81

1.90%

I first recommended YUM about a year ago here when they were around $39. They own some of the biggest names in the game including KFC, Taco Bell, and Pizza Hut and they have been downplaying their loses from Long John Silver’s and A&W’s. You can make the argument that they have taken some heat from Chipotle (NYSE:CMG) and Domino’s (NYSE:DPZ), but YUM’s global presence sets them apart from the crowd. The size of their operation also gives them strength. They are easily the second largest company in the industry, but still have room for growth both at home and abroad. They are a bit pricey right now, but two and a half weeks from now they report earnings and perhaps some commodities-based guidance will allow for an attractive entry point.

Brinker International (NYSE:EAT)

Price

Market Cap

Price to Earnings

Div Yield

$24.66

$2.20 Billion

15.08

2.30%

I took some serious flack for leaving Brinker off my Restaurant Monopoly board last July. They do have what’s possibly the coolest ticker on the exchange. Also, Michael Scott has said that, "Chili’s is the new golf course. It’s where business happens." Unfortunately, product placement in "The Office" does not equal growth in the industry. EAT does not have a history of increasing their dividend annually and their recent run from $14 to $24 does not make them an attractive pick up even at such a low P/E.

Bob Evan’s Farms (NASDAQ:BOBE)

Price

Market Cap

Price to Earnings

Div Yield

$31.58

$957 Million

16.96

2.60%

BOBE has been on an impressive run of their own over the last 10 months or so. They were certainly much more appealing at just over $10, but they still play a strong role in their niche industry. They have far less locations than their breakfast counterpart, Denny’s (NASDAQ:DENN) but are still a much better stock. A dividend increase should be coming up after the next quarter so it may seem prudent to lock in a price now.

P.F. Chang’s (NASDAQ:PFCB)

Price

Market Cap

Price to Earnings

Div Yield

$45.84

$1.05 Billion

22.78

2.60%

I really do not have much to say on PFCB. They are one of the two places on this list that I have never actually eaten at and I would not want to gauge their business without testing the product and service. I do know that they played an integral role in an episode of "South Park," but it’s not really relevant to the discussion. Additionally, this dividend was only implemented over the summer and was decreased after one quarter, so who’s to say how safe it is. Their P/E is higher than most in the industry, indicating some expected growth, but this sort of goes against them initiating a dividend.

Darden Restaurants (NYSE:DRI)

Price

Market Cap

Price to Earnings

Div Yield

$48.01

$6.63 Billion

15.58

2.70%

Darden is one of the best stocks on this list. They have a long standing, annually increasing dividend, strong restaurants (Red Lobsters, Olive Garden, Long Horn) that perform well in all markets since they are middle of the road, and a relatively low P/E. Their 8 to 10 month run is just as impressive as anyone else’s but if you catch them at the right price they could fit very well into your portfolio.

Frisch’s Restaurant’s (NYSEMKT:FRS)

Price

Market Cap

Price to Earnings

Div Yield

$21.06

$105.95 Million

10.97

2.80%

This would be the other restaurant on the list that I have never had the privilege of trying. Being from New Jersey, I have never feasted on the Big Boy or any of their subsidiaries. Their market cap just barely made the list and they have incredibly low volume so pricing can be sporadic. They have been trading in a pretty tight range since December so there comes a point where having the lowest P/E on the list does not really mean much. Regardless, a 2.8% yield is still appealing in this marketing, though FRS does not have a history of increasing it.

Einstein Noah (NASDAQ:BAGL)

Price

Market Cap

Price to Earnings

Div Yield

$15.96

$266.32 Million

23.82

3.10%

BAGL is another small cap stock on the list with an oddly high yield. But note that this is their first dividend, so it could be extremely unpredictable. The stock has gained 60% since September explaining the higher P/E, however the forward P/E s only 15 so perhaps there are greater things to come in the bagel market. I’m not exactly sure how they have been able to deal with all of the other breakfasts out their like Subway, Starbuck’s (NASDAQ:SBUX), and the like. One way is buying up other brands like Manhattan Bagel who already have long standing customers.

McDonald’s (NYSE:MCD)

Price

Market Cap

Price to Earnings

Div Yield

$74.93

$78.17 Billion

16.17

3.30%

It’s easy to say this but, McDonald’s is still the best restaurant out their anyway you look at it. They have an extraordinary dividend at 3.3%, amazing growth, and an amazing history. It’s an American past-time, but it’s also a vital part of our nation’s future, along with the rest of the world. They are a dividend champion increasing annually for decades and have a massive market cap. Some thought that it was a big deal that there are now more Subways than McDonalds, but those sort of numbers do not matter. I can walk a single block in Manhattan and pass 3 Subways with very few customers; that does not mean that they are outselling McDonald’s. When it comes to margins, MCD is the best, even though they will be increasing prices by 2-3% this year. Their restaurants run like a well oiled machine and yet, somehow they are still only trading at 16 times their earnings.

This list only comprises restaurant stocks with dividends. For a more complete look at the industry I would check out this industry article or this article on the rising commodities cost. Outside of dividends I am still a fan of Chipotle (CMG) and their continued expansion. I would also give a look at Buffalo Wild Wings (NASDAQ:BWLD).

Source: The Best Dividends in Restaurants