Here are two "steady eddies" for income and growth, asserts Chuck Carlson, a specialist in dividend reinvestment plays and editor of DRIP Investor.
Darden Restaurants (DRI) is a leading player in the dining space. It operates Olive Garden, LongHorn Steakhouse, Cheddar’s Scratch Kitchen, Yard House, The Capital Grille, Seasons 52, Bahama Breeze, Eddie V’s Prime Seafood, and Capital Burger brands.
The firm has posted solid results of late. Sales and profits beat estimates in the fiscal third quarter ended February. All of the firm’s brands recorded record total sales for the quarter.
“To-go” sales were solid during the quarter and accounted for 26% of total sales at Olive Garden and 14% at LongHorn. Digital transactions accounted for 10% of Darden’s total sales. Overall, total sales were up nearly 14% for the quarter, with same-store sales up a robust 11.7%. This same-store performance outpaced the industry by 450 basis points, according to the company.
Darden will face a tougher comp in the fiscal fourth quarter. Revenue is expected to be in the range of $2.73 billion to $2.78 billion, with per-share profits in the range of $2.43 to $2.58. Same-store sales growth should be in the 3% to 5% range.
Darden stock has performed well of late and is trading around its 52-week high. The stock’s dividend yield of 3.2% is a nice booster to total-return prospects. A severe recession would likely crimp business, but Darden is in the sweet spot when it comes to dining concepts that individuals should continue to pay up for even in a slow economic environment.
Please note Darden offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company. Minimum initial investment is $1,000.
General Mills (GIS) has been a favorite for investors playing defense during volatile market periods. The company has a stable of popular brands, including Betty Crocker, Bisquick, Blue Buffalo, Bugles, Cheerios, Chex, Cocoa Puffs, Fiber one, Gold Medal, Haagen-Dazs, Kix, Lucky Charms, Nature Valley, Old El Paso, Pillsbury, Progresso, Raisin Nut Bran, Total, Trix, Wheaties, and Yoplait.
The company’s strong brands in certain food segments, such as cereals, make the firm less vulnerable to the “trading down” to cheaper brands that consumers often do during economic slowdowns.
The company has beaten earnings estimates in the last four quarters, and earnings estimates have been rising for this year and next. General Mills is not a cheap stock — these shares trade at 20 times 2023 earnings estimates.
Nevertheless, the premium multiple reflects the firm’s consistency and its appeal as a “port in the storm” during volatile market periods. The dividend yield of 2.6% enhances total-return potential.
I don’t suspect General Mills to be a market leader during “risk-on” market environments, but I like the stock’s chances of outperforming the broad market this year. General Mills has a direct-purchase plan. Minimum initial investment is $250.
