EAT Brinker International Inc

Brinker International Inc. (EAT) recently hiked its quarterly dividend payout by 4 cents to 20 cents per share, reflecting a 25.0% increase from the prior dividend payout. This equates to an annual payout of 80 cents per share. The increased dividend will be paid on September 27, 2012, to stockholders of record as of September 10, 2012.

Brinker, the parent of Chili's and Maggiano’s, holds a consistent track record with regards to dividend payout. The latest hike brings the forward annual dividend yield to 2.36% as of August 23, 2012. Looking back, in August 2011, Brinker had raised its quarterly dividend by 14%, followed by a 27% hike in March 2010.

Brinker’s forward annualized dividend yield of 2.36% surpassed the industry average of 1.31%. Although it edged past the annualized dividend yield of 1.75% of one restaurant biggie, Yum! Brands Inc. (YUM), it lagged another sector behemoth McDonald’s Corp. (MCD)’s dividend yield of 3.16%. During the last five years, Brinker’s dividend has grown at a rate of 13.49%; a much faster pace than the industry average of 5.31%.

This Texas-based restaurant chain has also enhanced shareholders’ value through a share buyback program.  On the same day of dividend hike, the company extended its share buyback program by an additional $500 million. The latest authorization brings the total outstanding share repurchases to $626 million. The company has been repurchasing its common stocks consistently for the last couple of quarters.

Brinker’s financial position remains stable. It generates sufficient free cash flow to return capital to the shareholders through the above-said methods. During the recently concluded fourth-quarter 2012, the company repurchased 2.7 million shares for approximately $78.9 million. At year-end, the company had current assets of $194.8 million and shareholders’ equity of $309.9 million.

We appreciate Brinker’s efforts to consistently return long-term shareholder and franchisee value even amidst sluggish economic growth. We believe that an increase in dividend payment as well as share repurchase affirms the company’s optimistic outlook and ensures strong future growth.

Brinker currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are maintaining our long-term Outperform recommendation on the stock.
 

 
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