Brinker International, Inc. (EAT), Darden Restaurants, Inc. (DRI): You Should Do More Than Just Eat at Chili’s

The focus for DineEquity Inc (NYSE:DIN) is on being the dining choice for value-conscious consumers. For DineEquity it starts with consumers choosing to grab breakfast at IHOP and finishing their day at Applebee’s Neighborhood Bar & Grill. The strategy behind both brands is great food at an affordable price.

For shareholders in DineEquity Inc (NYSE:DIN), the company should complete its transition to being a 100% franchised business model by the end of the year. This will reduce overhead and boost margins and cash flow. The focus will then be on rolling out more franchises to more markets. Currently, the company is operating in only 17 countries, so there’s plenty of room for expansion.

Foolish assessment

I see plenty of room for further growth in the casual-dining segment. Brinker International, Inc. (NYSE:EAT) has done a great job with its Chili’s international expansion. Brinker International has a low PEG ratio of approximately 1.2 and a forward P/E of 13.

Darden Restaurants, Inc. (NYSE:DRI) has the highest yield among the three for income investors at 4.4%. Over the last five years, Darden has increased the dividend at a 22% compounded annual rate. The enterprise value/EBITDA is also the lowest among the three at 8.8.

DineEquity Inc (NYSE:DIN) just increased its dividend to $3.00 per share for a yield of 4.2%. Now that the company is pretty much free of its company-owned stores, I see the dividend continuing to increase. Its current payout ratio is only 25%, so there’s plenty of room to increase the dividend and share repurchases.

Of the three, my favorite would be Brinker International, Inc. (NYSE:EAT), followed by DineEquity Inc (NYSE:DIN) and Darden Restaurants, Inc. (NYSE:DRI). Brinker International and DineEquity have the edge when it comes to the value-conscious consumer, but Darden is taking steps to catch up.

Mark Yagalla has no position in any stocks mentioned. The Motley Fool owns shares of Darden Restaurants.

The article You Should Do More Than Just Eat at Chili’s originally appeared on Fool.com.

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