Benzinga | Dec 17, 2020 10:15AM EST

How Likely Is Darden Restaurants To Cut Their Dividend?

Here's your daily dividend safety check. Today, we're evaluating Darden Restaurants (NYSE:DRI) to ensure its 1.33% dividend yield is safe or not, as the company is releasing its earnings on December 18, 2020 before the bell. We will assess this based on its earning to dividend payout ratio and and whether its dividend has recently cut.

Darden Restaurants's Payout Ratio

Payout ratio is an important measure of dividend affordability. It's equal to dividends per share divided by earnings per share. Investors should not be too concerned about Darden Restaurants's relatively low payout ratio of 53.57%. When a payout ratio is low like this (i.e. below than 75%), it indicates a company has the money needed to cover its dividend. A ratio closer to 100% could suggest that a company is struggling to pay its dividend.

Has Darden Restaurants Cut Its Dividend in the Recent Past?

Generally, past behavior is not highly predictive of what's to come. However, companies that have a recent history of dividend cuts are more likely to cut them again due to less incentive to appease income investors than companies with historically consistent or rising dividends. Darden Restaurants has cut its dividend recently, in fact the last cut was in 2020. This implies that the company's management is willing to solve budgetary issues by cutting dividends and could do so again in the future.

How Safe Is Darden Restaurants's Dividend Overall?

Darden Restaurants has failed one of our dividend safety tests. It has a low payout ratio but has two recent cases of dividend cuts. With all of this in mind, it is unlikely that Darden Restaurants will cut its dividend next quarter.

Looking for more help identifying reliable investments? Check out Benzinga's Breakout Opportunity Letter.