In this article, we discuss 10 best restaurant dividend stocks to buy. You can skip our detailed analysis of the restaurant sector and its performance, and go directly to read 5 Best Restaurant Dividend Stocks to Buy.
The pandemic of 2020 has profoundly changed the general outlook of restaurants. The industry faced unprecedented challenges and had to navigate through a rapidly evolving landscape. One of the most notable changes was the shift towards takeout and delivery services. Restaurants had to quickly adapt their business models to offer these options and leverage technology to facilitate online ordering and contactless transactions. The concept of online ordering in the restaurant sector has now persisted for a significant duration, becoming a permanent feature within the industry. Takeout continues to be popular despite a decrease from its peak during the first year of the pandemic. In 2022, 85% of orders at fast-food restaurants in the United States were for takeout, as reported by NPD Group. This percentage has dropped from the highest point of 90% in 2020 but remains higher than the pre-pandemic level of around 76%. The report also mentioned that around 33% of orders at full-service restaurants were for takeout last year, which is almost double the rate before the pandemic.
The popularity of online and digital ordering is expected to keep increasing. Grand View Research reported that the global online food delivery market will reach a size of USD 505.50 billion by 2030, representing a (CAGR) of 10.3% from 2023 to 2030. The report further highlighted that this growth will be driven by the easy availability of smartphones as they make it convenient for users to browse restaurant options and place orders. With better connectivity and increased smartphone access, businesses can expand into new markets and attract more customers.
While many industries were negatively affected by high inflation last year, the restaurant sector managed to maintain a stable position. The S&P 500 Restaurant Sub Industry Index gained 24.5% in the past 12 months and its year-to-date returns came in at 12.5%. However, as concerns about inflation persist, major food companies and restaurant chains are making efforts to attract price-conscious consumers. According to a report by Wall Street Journal, in response to changing consumer behaviors in grocery shopping and dining out, companies like Yum! Brands Inc. (NYSE:YUM) and The Kraft Heinz Company (NASDAQ:KHC) are directing their focus toward value offerings. The report also mentioned that certain restaurant chains, such as McDonald's Corporation (NYSE:MCD) and Domino’s, have observed that lower-income consumers are adjusting their dining habits. These consumers are opting for smaller-sized meals at restaurants or reducing the frequency of their delivery orders, which often incur an additional fee.
For this article, we scanned Insider Monkey’s database of 943 hedge funds as of Q1 2023 and identified dividend companies that operate in the restaurant industry. These companies typically own and operate various types of restaurants, including fast-food chains, casual dining establishments, fine-dining restaurants, and quick-service restaurants. After careful consideration, we selected 10 stocks from this list based on their popularity among hedge fund investors. We then arranged these stocks in ascending order of hedge fund sentiment.
Nathan's Famous, Inc. (NASDAQ:NATH) is a New York-based company that operates a chain of fast-food restaurants. These restaurants serve a variety of menu items, with the iconic Nathan's Famous hot dogs being the flagship product. The company is particularly renowned for its annual Fourth of July hot dog eating contest held in Coney Island, New York, which has gained international attention.
Nathan's Famous, Inc. (NASDAQ:NATH) recently announced its earnings for the fourth quarter of 2023. The company reported revenue of $27.4 million, which showed a 10.7% growth from the same period last year. Its operating income for FY23 came in at $34.4 million, up from $29.8 million in the previous year.
Nathan's Famous, Inc. (NASDAQ:NATH) started paying dividends to shareholders in 2015. It currently pays a quarterly dividend of $0.50 per share, having raised it by 11% in February this year. With a dividend yield of 2.54%, NATH is one of the best dividend stocks on our list. In addition to NATH, Yum! Brands Inc. (NYSE:YUM), McDonald's Corporation (NYSE:MCD), and The Kraft Heinz Company (NASDAQ:KHC) are other restaurant stocks to consider.
At the end of Q1 2023, 9 hedge funds tracked by Insider Monkey reported having stakes in Nathan's Famous, Inc. (NASDAQ:NATH), compared with 7 in the previous quarter. These stakes have a total value of over $37.3 million. Among these hedge funds, GAMCO Investors was the company's leading stakeholder in Q1.
Arcos Dorados Holdings Inc. (NYSE:ARCO) is a company that operates as the largest independent McDonald's franchisee in the world. It has the exclusive rights to own, operate, and grant franchises of McDonald's-branded restaurants in 20 countries and territories in Latin America and the Caribbean.
Arcos Dorados Holdings Inc. (NYSE:ARCO), one of the best dividend stocks on our list, has a different dividend policy than most of the companies as it pays dividends to shareholders annually. The company offers an annual dividend of $0.19 per share and has a dividend yield of 2.06%, as of July 13.
In the first quarter of 2023, Arcos Dorados Holdings Inc. (NYSE:ARCO) reported revenue of $990.8 million, which saw a 25.3% growth from the same period last year. The company's operating cash flow for the period came in at roughly $30 million and it had $263.8 million available in cash and cash equivalents at the end of March.
As of the close of Q1 2023, 15 hedge funds in Insider Monkey's database held stakes in Arcos Dorados Holdings Inc. (NYSE:ARCO), unchanged from the previous quarter. These stakes are collectively valued at over $63.77 million.
Jack in the Box Inc. (NASDAQ:JACK) is a California-based fast-food restaurant company that owns, operates, and franchises the Jack in the Box quick-service restaurant chain. The company reported solid earnings in its first quarter of 2023. It generated $395.7 million in revenues during the quarter, which showed a 22.8% growth from the same period last year. The company's operating cash flow came in at over $94.1 million, up from $67.8 million in the prior-year period.
On May 17, Jack in the Box Inc. (NASDAQ:JACK) declared a quarterly dividend of $0.44 per share, which was in line with its previous dividend. The stock's dividend yield on July 13 came in at 1.82%. It is among one of the best dividend stocks from the restaurant sector.
At the end of March 31, 17 hedge funds in Insider Monkey's database were bullish on Jack in the Box Inc. (NASDAQ:JACK), up from 15 in the preceding quarter. The stakes owned by these money managers are collectively worth roughly $122 million. Steve Cohen's Point72 Asset Management was the company's largest stakeholder in Q1.
The Wendy's Company (NASDAQ:WEN) is a global fast-food restaurant chain that operates under the Wendy's brand. The company owns and operates a network of Wendy's restaurants, which serve a diverse menu and provide various dining options.
On May 30, The Wendy's Company (NASDAQ:WEN) declared a quarterly dividend of $0.25 per share, having it raised by a 100% earlier this year. The company has raised its dividend multiple times since the pandemic of 2020, which makes it one of the best dividend stocks on our list. The stock has a dividend yield of 4.69%, as recorded on July 13.
In the first quarter of 2023, The Wendy's Company (NASDAQ:WEN)'s revenue of $528.8 million showed an 8.2% year-over-year growth. The company's operating cash flow for the quarter came in at $53 million and its free cash flow amounted to $63.7 million, which showed a 152.4% and 43.5% growth from the same period last year, respectively.
Insider Monkey's database for Q1 2023 shows that 24 elite funds owned stakes in The Wendy's Company (NASDAQ:WEN), compared with 28 a quarter earlier. These stakes have a total value of over $693.4 million.
Oakmark Funds mentioned The Wendy's Company (NASDAQ:WEN) in its Q1 2023 investor letter. Here is what the firm has to say:
“The Wendy’s Company (NASDAQ:WEN)’s is the second-largest quick-service burger chain in the U.S. This iconic brand generates $13.3 billion of systemwide sales from 7,095 restaurant locations around the world. Wendy’s is an asset-light franchisor that earns most of its profits from royalties, franchise fees and rent. The business is insulated from food and labor inflation since 95% of the restaurant base is owned and operated by franchisees. Wendy’s topline has proven remarkably resilient through diverse economic climates, producing 12 straight years of positive same-restaurant sales. The company is well-positioned for accelerating topline growth due to its recent launch of a breakfast menu, steady market share gains, international expansion and new restaurant openings. Despite these favorable characteristics, we had an opportunity to purchase shares at ~17x free cash flow, representing a discount to its quick-service restaurant peers as well as private market transactions.”
6. Restaurant Brands International Inc. (NYSE:QSR)
Number of Hedge Fund Holders: 27
Restaurant Brands International Inc. (NYSE:QSR) is a Canadian-American multinational fast-food company that operates and franchises a portfolio of well-known restaurant brands. It is the parent company of three iconic brands: Burger King, Tim Hortons, and Popeyes Louisiana Kitchen.
Restaurant Brands International Inc. (NYSE:QSR) is one of the best dividend stocks on our list with seven years of consecutive dividend growth. The company offers a quarterly dividend of $0.55 per share and has a dividend yield of 2.88%, as of July 13. Yum! Brands Inc. (NYSE:YUM), McDonald's Corporation (NYSE:MCD), and The Kraft Heinz Company (NASDAQ:KHC) are other restaurant stocks popular among investors.
In the first quarter of 2023, Restaurant Brands International Inc. (NYSE:QSR) generated $1.6 billion in revenues, which showed a 9.7% growth from the same period last year. The company's free cash flow for the period amounted to over $1.24 billion and its operating cash flow came in at $95 million.
Of the 943 hedge funds in Insider Monkey's database as of Q1 2023, 27 hedge funds owned stakes in Restaurant Brands International Inc. (NYSE:QSR), worth collectively over $2.07 billion. With over 24 million shares, Pershing Square was the company's leading stakeholder in Q1.
