Martin Fridson, editor of Forbes/Fridson Income Securities Investor, sees favorable returns from Darden Restaurants, Inc. (DRI). Yielding 3.7%, the firm owns well-known restaurants offering full-service dining.
The company manages over 1,900 restaurants in North America that include The Capital Grille, Olive Garden, Longhorn Steakhouse, Ruth’s Chris Steakhouse, Cheddar’s Scratch Kitchen, Yard House, Bahama Breeze, and more.
DRI’s broad scale, along with its brand diversity and geographic dispersion, helps limit its exposure to economic weakness. The company’s operating fundamentals have strengthened, as management has successfully executed sales and cost initiatives.
Revenue and EBITDA have steadily grown above pre-pandemic levels, resulting in higher credit ratings. DRI’s credit profile and ratings reflect the positive trajectory of sales, profitability, and cash flow, strengthening key credit metrics.
DRI reported solid 4Q fiscal 2024 adjusted net income from continuing operations of $318 .2 million. Adjusted earnings per share of $2.65 surpassed analysts’ $2.61 estimates.
Total revenue of $2.96 billion rose 6.8% year-over-year, matching expectations. Results were driven by the addition of 80 Ruth’s Chris locations and 37 other net new restaurants. DRI purchased Ruth’s Chris in 2023 for $715 million.
The company’s common stock investment is suitable for low-to medium-risk taxable portfolios. Dividends are qualified and taxed at the 15%-20% rate.
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