Singaporeans are well-known for their love of good food. Some travel across the island to find delicious dishes.
But when it comes to investing, did you know that restaurant stocks in the US can provide you with a steady diet of dividends?
These dividends act as a useful stream of passive income that can supplement your earned income.
With their strong market share, robust business model and consistent free cash flow generation, these four restaurant stocks have what it takes to supply you with reliable dividends for many years to come.
McDonald’s (NYSE: MCD)
McDonald’s should be a familiar name to most people, being one of the largest fast-food chains in the world with over 43,000 locations in over 100 countries.
The company, famous for its golden arches logo, franchises around 95% of its outlets to independent, local business owners.
For 2024, McDonald’s reported a 2% year-on-year increase in total revenue to US$25.9 billion.
Operating profit inched up 1% year on year to US$11.7 billion but net profit dipped by 3% year on year to US$8.2 billion because of higher interest expenses.
The fast-food giant generated a positive free cash flow of US$6.7 billion for 2024, 8% lower than the US$7.3 billion churned out in 2023.
Despite the lower profits and free cash flow, McDonald’s raised its quarterly dividend by 6% year on year to US$1.77, showcasing continued confidence in its Accelerating the Arches growth strategy.
This increase makes it the 48th consecutive year that McDonald’s has raised its annual dividend.
Its growth strategy involves maximising its marketing by emphasizing brand and affordability, committing to its core (products), and doubling down on the 4 “Ds” of Delivery, Digital, Drive-Thru, and Development.
Domino’s Pizza (NASDAQ: DPZ)
Domino’s Pizza is the largest pizza company in the world with more than 21,300 stores in more than 90 markets.
Like McDonald’s, Domino’s Pizza has 99% of its stores as franchised outlets at the end of 2024.
The company reported a robust set of earnings for 2024 with revenue rising 5.1% year on year to US$4.7 billion.
Operating profit improved by 7.3% year on year to US$879 million while net profit climbed 12.5% year on year to US$584.2 million.
Domino’s Pizza continued its streak of consistent free cash flow generation.
For 2024, the pizza giant generated US$512 million of free cash flow, 5.5% higher than the prior year.
Because of the higher profit and strong free cash flow generation, the board approved a 15% year-on-year increase in the company’s quarterly dividend to US$1.74 per share.
The business saw its 31st consecutive year of same-store sales growth, and a total of 775 new stores were opened last year.
Darden (NYSE: DRI)
Darden is a restaurant company that owns a chain of different brands such as Olive Garden, Longhorn Steakhouse, Yard House, and Cheddar’s Scratch Kitchen.
The business reported an encouraging set of earnings for the first nine months of fiscal 2025 (9M FY2025) ending 23 February 2025.
Revenue inched up 4.4% year on year to US$8.8 billion with operating profit increasing 6.6% year on year to US$979.5 million.
Net profit improved by 3.7% year on year to US$745.8 million.
Darden also generated a positive free cash flow of US$764.1 million for 9M FY2025, 6.5% higher than the previous corresponding year.
For the current fiscal year, Darden raised its quarterly dividend by 6.9% year on year to US$1.40 per share.
Last year, Darden acquired Chuy’s Holdings for a total of US$605 million.
Chuy’s operates full-service restaurants serving authentic Tex-Mex inspired dishes and has 101 restaurants in 15 states as of July 2024.
Darden also continued its partnership with food delivery company Uber (NYSE: UBER) to roll out on-demand delivery for Cheddar’s Scratch Kitchen, in a pilot that involves 10 restaurants.
Papa John’s International (NASDAQ: PZZA)
Papa John’s International is a pizza chain that uses fresh dough and eschews artificial flavours and colours.
The company is the third-largest pizza delivery company in the world with more than 6,000 restaurants in around 50 countries.
The pizza chain reported a mixed set of results for 2024 with revenue dipping 3.6% year on year to US$2.06 billion.
Operating profit, however, increased by 6.5% year on year to US$156.7 million and net profit crept up 1.5% year on year to US$83.3 million.
Papa John’s also generated a positive free cash flow of US$34.1 million.
The business paid out a consistent quarterly dividend of US$0.46 per share, unchanged from a year ago.
For 2024, Papa John’s opened 124 net new stores.
The company expects 2025’s sales to increase by 2% to 5% year on year and plans to open 85 to 115 new stores in the US and 180 to 200 internationally.
Disclosure: Royston Yang does not own shares in any of the companies mentioned.
