• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Closed Doors Cause Restaurants to Take Dividends, Buybacks Off Menu

The impact of the coronavirus on the cash flow of companies in the restaurant sector is leading to capital-saving moves by several notable names.
By JONATHAN HELLER
Mar 27, 2020 | 10:00 AM EDT
Stocks quotes in this article: CBRL, BLMN, DRI, TXRH, MCD, WEN, DIN, EAT, CAKE, RUTH

On Wednesday, Cracker Barrel Old Country Store (CBRL) made a move that I expect we'll see more of, unless life gets back to normal in the near term, which is unlikely. The casual dining name suspended its regular dividend and deferred its most recently declared payout in order to conserve cash. Cracker Barrel joined others in the sector that already made that move, including Bloomin' Brands (BLMN) , Darden Restaurants (DRI) and Texas Roadhouse (TXRH) .

Others, including McDonald's (MCD) , Wendy's (WEN) and Cracker Barrel, have suspended their stock buyback programs, which may be more of a political move given the disdain some have expressed toward companies buying back stock amid bailouts and the discretionary nature of buybacks in general.

I expect we'll see additional capital-saving moves moving forward in this at-risk sector, where margins are generally thin and it's a fine line between success and failure. Indeed, I'm not sure how the landscape will look once customers are allowed back in.

Current high-yielders to keep an eye on for potential dividend suspensions include Dine Brands Global (DIN) (10.2% yield), Brinker International (EAT) (9.8%), Cheesecake Factory (CAKE) (7.6%) and Ruth's Hospitality Group (RUTH) (8.3%).

The publicly traded landscape was already crowded before, with some names struggling and at risk even in what had been a solid economic environment. Close the doors except to take-out orders and the situation just got a whole lot worse.

Historically, restaurants have been one of the best-performing sectors following the end of a recession because demand picks up once consumers are more confident and apt to eat outside the home. Typically, the supply of restaurants falls during a recession and as demand ramps up, profits soar, and the industry expands supply.

The issue now is not a demand problem, as is typical in a recession. Rather, it's a supply problem. Restaurants simply are not open for regular business, and I'm not sure how much slack take-out business will provide for those that are typically sit-down venues.

You've got to wonder once restaurants do reopen how quickly patrons will come back. I say this for couple reasons. The first is whether there will be a fear among customers to eat a meal in a roomful of people after they've been confined to their homes because of a disease that is spread in close quarters. Second, depending on how long employment is compromised due to the country shutting down, consumers may not be willing or able to spend as they did pre-virus, at least for a while.

As a postscript, Cheesecake Factory sent a letter to its landlords last week stating that it will be unable to make April rent payments. There may be more of this to follow.

This essentially is the perfect storm for restaurant stocks, and I'm not sure of the ramifications that bailouts will have for the sector.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Heller had no positions in the stocks mentioned.

TAGS: Dividends | Investing | Stocks | Consumer | Food & Drink | Restaurants | Coronavirus

More from Stocks

What's the Next Move for Crude Oil?

Bruce Kamich
Jul 5, 2022 3:30 PM EDT

A temporary break in oil prices, along with lower interest rates, could be a near-term positive for equity prices.

Can Nvidia Rally and Help the Tech Sector Recover?

Bruce Kamich
Jul 5, 2022 3:00 PM EDT

Why Tuesday could mark the start of a turnaround.

Tesla's Charts Are Resisting a Downside Break

Bruce Kamich
Jul 5, 2022 1:54 PM EDT

Here's what aggressive traders could do.

We Can't Predict the Rest of 2022, but We Must Have a Game Plan

Brad Ginesin
Jul 5, 2022 1:30 PM EDT

Many are forecasting bad times ahead, but are they going to extremes? Here's my strategy for the the second half of the year.

When Did We Stop Worrying About the Wealth Effect?

Peter Tchir
Jul 5, 2022 1:00 PM EDT

This looks like a market pricing in a recession/policy mistake.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:01 PM EDT PAUL PRICE

    A Recent Director Buy in Children's Place (PLCE)

    Four of the most recent insider trades in Children...
  • 07:34 AM EDT PAUL PRICE

    A $525,000 Vote of Confidence on Macerich (MAC)

  • 09:49 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    Stop Wishing, Hoping, and Praying and Take Control...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login