Channel Check, Please!

 | Mar 21, 2012 | 9:30 AM EDT  | Comments
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Stock quotes in this article:

dri

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mcd

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bagl

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pfcb

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cbrl

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bobe

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frs

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cec

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txrh

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eat

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bh

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yum

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wen

This should prove to be a very interesting week in the Heller household. With my wife en route to Haiti, the three Heller children will be subject to my cooking for the next week. That's probably a frightening thought for my teenage daughters, who are much more concerned about what they eat than my son and I. This could end up being a good week for channel checks at a few of the publicly traded restaurant names.

I'm thinking of limiting it to those that pay dividends; of course, I won't tell the kids that bit of news lest they think that the old man has finally lost it. We will more than likely start at a local Darden (DRI) location, namely Olive Garden, which is becoming a family favorite. It has never failed to deliver on a good meal, at least when I've been there. Darden itself has quietly become one of the sector's dividend champions, with a 3.3% yield and a dividend that has grown at a 27% compound annual growth rate (CAGR) in the past 10 years. Last summer, the company hiked the quarterly dividend 34%, to $0.43 from $0.32, and the payout ratio is still below 50%. Of course, the real estate angle here is somewhat compelling: Darden owns the land and buildings for 973 of its 1894 locations, the buildings and equipment for another 726.

The next stop would have to be McDonald's (MCD), although that will more than likely not include the girls, who now shun certain fast food. McDonald's is also becoming a dividend champion in its own right, with a compelling 11% CAGR the past 10 years. The company's most recent increase was a healthy 15%, to $0.70 from $0.61. Shares now yield 2.9%, and the payout ratio is 48%. I'd bet that the company will continue along the path of dividend growth for as long as it can.

Bagels from Einstein Noah (BAGL) are on tap for breakfast. While this small-cap's 3.3% yield is among the highest of the chains mentioned here, there is not a lot of history behind it. Einstein only began paying a dividend in early 2011, and with a payout ratio of 64%, the prospects of dividend growth are unclear.

I doubt that we'll make it to PF Chang's (PFCB), which currently yields 2.7%. That's quite high for a name that is still considered to be in growth mode. The company does not have a long dividend history, but recently hiked its quarterly dividend 10% to $0.275. I'm simply not a big fan of the food, although I'm sure the kids would love to go there instead of another intended stop.

That would be Cracker Barrel (CBRL), of course, and its 1.8% yield. In terms of the highest yielding names, we'd be skipping Bob Evans (BOBE), 2.6%, and Frisch's (FRS), 2.5%. Neither have locations close enough to my home. We won't be hitting CEC Entertainment's (CEC), 2.3%, local Chuck E. Cheese's either; we're years past that, thankfully. Texas Roadhouse (TXRH), 2.1%, and Brinker (EAT), 2.2%, are possibilities -- I may have to throw one of those in to get the kids interested in Cracker Barrel.

I may have overexposed them to Cracker Barrel, a name that has fascinated me for years. Yes, I like the food; but I also like the branding and the real estate. The company owns more than 400 of its 600-plus locations. While I've been out of the name for a while, I do have indirect exposure through Biglari Holdings' (BH) 10% stake in the company. Who knows, maybe Biglari will ultimately make a play for the whole enchilada, which would not be an easy task.

Speaking of enchiladas, we could always hit Yum! Brands' (YUM), 1.7%, Taco Bell in a pinch. Or even my old nemesis and new fast-food heavyweight Wendy's (WEN), 1.6%, which my daughters are usually much more open to than McDonald's.

This could be a very long week -- for the kids, that is.

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