3 Stocks With Strong Yields and Sustainbale Payouts Are Raising Dividends Again
Important Points
- Three major companies, Darden Restaurants, Delta Air Lines, and Kroger, announced quarterly dividend increases from 8% to more than 14%.
- While payout ratios near or below 60% are generally considered stable, Darden and Delta already meet that bar and Kroger’s ratio gets even better once the previous impairment charge is taken out.
- Long-term dividend growth has been strong for all three names, with Darden’s payout rising 31.09% annually over five years and Delta more than doubling since its 2023 return.
Three big names recently announced big dividend increases. Ranging in between 8% and 14%, this increase adds real weight to the returns investors receive. However, when it comes to dividend stocks, investors need to balance growth with sustainability.
The payout ratio is a key metric that helps assess sustainability. It divides a company’s dividend per share (DPS) by its earnings per share (EPS), which shows the percentage of profits paid out as dividends. Generally, investors consider payout ratios around 60% or less to be stable. Importantly, all three stocks have strong dividend stability, despite initial concerns about one name breaking after testing.
Darden Lifts Dividend, Payout Ratio Goes Right
First up is Darden Restaurants (NYSE: DRI ). With a market capitalization approaching $23 billion, the company is one of the largest restaurant stocks in the United States. This comes through its portfolio of around 10 restaurants, of which Olive Garden is the best known. Last quarter, Olive Garden accounted for about 41% of Darden’s total sales, while LongHorn Steakhouse contributed about 27%. LongHorn led growth last quarter, with comparable sales up 9.5%.
Darden recently announced a strong 8% dividend increase, raising its quarterly payout to 1.62 cents per share. The company plans to pay its next dividend on Aug. 3 to shareholders of record as of the close of July 10. This brings the implied dividend yield to 3.2%.
Darden is also in a strong and improving position when it comes to equity sustainability. Based on the company’s earnings for the last 12 months, the company’s payout ratio stands at 62.43%, near 60%. However, as analysts expect Darden’s earnings to grow, they also expect the company’s payout ratio to fall. Based on current year earnings estimates, the company’s payout ratio will drop to 57.45%. Overall, Darden’s strong profitability is likely to continue, given its strong sustainability metrics.
Delta’s Dividend has more than doubled in 3 years
The passenger airline industry in the United States is highly concentrated, with only four companies having a market capitalization of more than $10 billion. Among them, Delta Air Lines (NYSE: DAL ) tops the pile, a company valued at around $60 billion.
In particular, Delta suspended its distribution in 2020 due to the pandemic and the negative impact on travel. However, the company has scaled back its payout in 2023, starting at 10 cents per share. Since then, the company has grown its shares at a very rapid pace. The company’s recent dividend increase of more than 14% boosts its quarterly payout to 21.5 cents per share, and Delta’s shares have more than doubled since 2023. Its next dividend will be paid on July 30 to shareholders of record as of late July 9. Overall, Delta’s annual yield was shown at 0.94% compared to yesterday, but it is still a solid bonus for shareholders.
Additionally, Delta’s payout ratio is in very strong shape. It currently sits at 12.54% and should remain close to that level this year and next year.
Kroger: Forward Payout Ratio Doesn’t Tell the Full Story
Last but not least is grocery store giant Kroger (NYSE: KR ). In the United States, Walmart (NASDAQ: WMT ) and Costco Wholesale (NASDAQ: COST ) dominate the grocery store industry. Their market capitalization is in the “mega-cap” range, or over $200 billion. However, Kroger is one of the next largest players, with a market capitalization of nearly $35 billion.
Kroger recently announced a huge dividend increase of more than 11%. This will lift the company’s quarterly payout to 39 cents per share. The company plans to make the next payment on September 1 to shareholders of record as of the August 14 close. Overall, Kroger offers a good level of dividend yield, with an implied yield close to 2.7%.
At first glance, the company appears to be in a bad position from a financial sustainability perspective, with a payout ratio of 91.76%. However, this estimate looks worse than it is because of the significant GAAP EPS loss of $2.02 the company took in the last two quarters. This was largely due to a $2.6 billion impairment charge the company took related to its fulfillment network. With this charge behind it, Kroger’s earnings should improve significantly going forward. Based on current year estimates, Kroger’s payout ratio would be 29.94%, in the middle of the sustainable range.
Darden, Delta, Kroger: Dividend Yield, Sustainability, and Growth
Overall, Darden, Delta, and Kroger all offer at least a solid dividend income ratio. Meanwhile, despite Kroger’s average payout over the past 12 months, all three are in a strong position for fiscal sustainability going forward. All three have also grown their shares at a rapid pace. As noted, Delta’s shares have risen more than 100% since the company’s return. Meanwhile, Darden’s shares have grown by a five-year annualized rate of 31.09%, while Kroger’s has grown by 14.53%.
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Companies mentioned in this article:
Company
Current Price
Price Changes
Dividend Yield
The P/E ratio
Consensus ratio
Consensus Price Target
Darden Restaurants (DRI)
$206.48
+1.6%
2.91%
19.55
Buy Medium
$229.32
Delta Air Lines (DAL)
$90.38
-1.4%
0.83%
13.18
Buy Medium
$93.60
Kroger (KR)
$59.92
+2.9%
2.34%
35.28
Buy Medium
$71.94
| Company | Current Price | Price Changes | Dividend Yield | The P/E ratio | Consensus ratio | Consensus Price Target |
|---|---|---|---|---|---|---|
| Darden Restaurants (DRI) | $206.48 | +1.6% | 2.91% | 19.55 | Buy Medium | $229.32 |
| Delta Air Lines (DAL) | $90.38 | -1.4% | 0.83% | 13.18 | Buy Medium | $93.60 |
| Kroger (KR) | $59.92 | +2.9% | 2.34% | 35.28 | Buy Medium | $71.94 |
About Leo Miller
Experience
Leo Miller has been a contributing writer for DividendStocks.com since 2024.
- Professional Background: Leo Miller is a financial writer with a background in investment research and market analysis. He held roles as an investment research partner at Laird Norton Wetherby and as a research analyst at Sungarden Investment Publishing, where he gained extensive experience in valuation and portfolio strategies.
- Confirmation: He holds a Bachelor of Business Administration in Finance from the University of Washington’s Foster School of Business, a top-ranked public business school. Passed the CFA Level II exam.
- Financial Experience: Leo started researching and investing in gold mining stocks in 2019 and started writing about finance and investing in 2021. He joined DividendStocks.com as a contributing writer in 2024, where he covers both stocks and ETFs. A strong research base and direct exposure to the financial markets shape his opinions.
- Writing Focus: He specializes in technology stocks, dividend-paying companies, ETFs, and value-oriented opportunities. His work emphasizes clarity, practical understanding, and education for investors at all levels.
- How to Invest: Leo follows a disciplined, long-term investment strategy based on fundamental analysis, with a strong focus on economics, industry and sector research, and passive investment principles.
- Motivation: Leo finds the stock market endlessly compelling and enjoys the challenge of separating meaningful data from the noise. He is passionate about analyzing what makes businesses stand out—and sharing that insight to guide informed investment decisions. As he puts it, “Strong analysis requires separating the wheat from the chaff.”
- Fun fact: Leo credits his grandfather with sparking his interest in investing and is a lifelong animal lover.
- Areas of Expertise: Fundamental analysis, economics, industry and sector analysis
Education
Bachelor in Business Administration, Finance, Foster School of Business at the University of Washington
