Brinker International, Inc. (EAT): Should You Invest Where You Eat?

DineEquity Inc (NYSE:DIN) is smaller than both aforementioned companies, and it relies on Applebee’s and IHOP. Despite only having two brands, it owns and operates 3,600 restaurants in 17 countries. DineEquity was once a top player, but increased competition has led to Applebee’s being seen as just another dinner option.

IHOP still has appeal, but due to changing trends and increased competition, consumers aren’t as likely to sit down and enjoy breakfast at an IHOP as they were in the past. This is evidenced by DineEquity Inc (NYSE:DIN)’s consistent revenue declines over the past five years. DineEquity yields 4.30%, but with a debt-to-equity ratio of 4.34, and no growth, current dividends might not be sustainable.

Conclusion

Brinker International, Inc. (NYSE:EAT) is growing, but the bar was a low one to hop. Still, management looks to be doing a good job of cutting costs and driving earnings while also increasing international exposure. But increased competition makes a company with only two brands a high risk.

If you’re looking to invest in the space, then you should consider going with a more diversified company that has demonstrated solid top-line growth and strong annual profits, a company like Darden Restaurants, Inc. (NYSE:DRI). Its 4.30% yield is also an added bonus.

However, this isn’t a resilient play, and it’s recommended that you keep a sharp eye on the health of the consumer. If you don’t have time to do so, then you may want to look elsewhere.