Key Points
- Three major companies, Darden Restaurants, Delta Air Lines, and Kroger, announced quarterly dividend increases ranging from 8% to more than 14%.
- While payout ratios near or below 60% are generally viewed as sustainable, Darden and Delta already meet that bar and Kroger's ratio improves sharply once a prior impairment charge is excluded.
- Long-term dividend growth has been strong across all three names, with Darden's payout climbing 31.09% annually over five years and Delta's more than doubling since its 2023 reinstatement.
Three giant names just announced substantial dividend increases. Coming in at between 8% and 14%, these increases add real weight to the dividend income that investors receive. However, when it comes to dividend stocks, investors need to balance increases 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), showing the percentage of earnings paid out as dividends. Generally speaking, investors consider payout ratios near 60% or below sustainable. Importantly, all three stocks have strong dividend sustainability, despite an initial concern at one name that breaks down after examination.
Darden Lifts Dividend, Payout Ratio Moving in the Right Direction
First up is Darden Restaurants (NYSE: DRI). With a market capitalization near $23 billion, the firm is one of the largest restaurant stocks in the United States. This comes through its portfolio of approximately 10 restaurant chains, with Olive Garden being the most well-known. Last quarter, Olive Garden made up around 41% of Darden’s total sales, while LongHorn Steakhouse contributed around 27%. LongHorn led growth last quarter, with comparable sales rising 9.5%.
Darden recently announced a solid 8% dividend increase, boosting its quarterly payment to 1.62 cents per share. The company plans to pay its next dividend on Aug. 3 to shareholders of record as of the July 10 close. This moves the stock’s indicated dividend yield to a very solid 3.2%.
Darden is also in a strong and improving position when it comes to dividend sustainability. Based on the firm’s last 12 months' earnings, the company’s payout ratio sits near 62.43%, close to the 60% mark. However, as analysts expect Darden’s earnings to grow, they also expect the firm’s payout ratio to fall. Based on current year earnings estimates, the company’s payout ratio would fall to 57.45%. Overall, Darden’s strong dividend is likely to persist, given its solid sustainability metrics.
Delta’s Dividend More Than Doubles in 3 Years
The passenger airline industry in the United States is relatively concentrated, with only four companies having market capitalizations above $10 billion. Among them, Delta Air Lines (NYSE: DAL) is at the top of the heap, with the firm valued at approximately $60 billion.
Notably, Delta suspended its dividend in 2020 due to the pandemic and the severe impact on travel. However, the company reinstated its payment in 2023, starting off at 10 cents per share. Since then, the firm has grown its dividend at an extremely fast pace. The company’s latest dividend increase of over 14% moves its quarterly payment to 21.5 cents per share, with Delta’s dividend more than doubling since 2023. Its next dividend is payable on July 30 to shareholders of record as of the July 9 close. Overall, Delta’s indicated dividend yield is not high at 0.94%, but it is still a solid bonus for shareholders.
Additionally, Delta’s payout ratio is in a very strong position. It currently sits at 12.54% and should remain near that level this year and next year.
Kroger: Backward-Looking Payout Ratio Doesn’t Tell the Full Story
Last up 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 capitalizations are in the “mega-cap” range, or above $200 billion. However, Kroger is one of the next-largest players, with a market capitalization of nearly $35 billion.
Kroger just announced a sizable dividend increase of more than 11%. This will move the firm’s quarterly payout to 39 cents per share. The company plans to make this next payment on Sept. 1 to shareholders of record as of the Aug. 14 close. Overall, Kroger offers a nice level of dividend income, having an indicated yield near 2.7%.
At first glance, the company appears to be in a bad position from a dividend sustainability standpoint, with a payout ratio of 91.76%. However, this ratio looks much worse than it is due to a significant $2.02 GAAP EPS loss the firm took two quarters ago. 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%, well within sustainable territory.
Darden, Delta, Kroger: Dividend Yield, Sustainability, and Growth
Overall, Darden, Delta, and Kroger all offer at least a solid degree of dividend income. Meanwhile, despite Kroger’s concerning payout ratio over the last 12 months, all three are in a strong position for dividend sustainability going forward. All three have also grown their dividends at a brisk pace. As noted, Delta’s dividend is up more than 100% since the company reinstated it. Meanwhile, Darden’s dividend has grown at a five-year annual rate of 31.09%, and Kroger’s has grown by 14.53%.
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Companies Mentioned in This Article:| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Darden Restaurants (DRI) | $204.49 | +0.6% | 2.93% | 19.73 | Moderate Buy | $229.32 |
| Delta Air Lines (DAL) | $88.94 | -3.0% | 0.84% | 12.93 | Moderate Buy | $93.60 |
| Kroger (KR) | $58.56 | +0.5% | 2.39% | 34.48 | Moderate Buy | $72.00 |
About Leo Miller
Experience
Leo Miller has been a contributing author for DividendStocks.com since 2024.
- Professional Background: Leo Miller is a financial writer with a background in investment research and market analysis. He has held roles as an investment research associate at Laird Norton Wetherby and as a research analyst at Sungarden Investment Publishing, where he gained hands-on experience evaluating equities and portfolio strategies.
- Credentials: 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. He has passed the CFA Level II exam.
- Finance Experience: Leo began 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 foundation and direct exposure to financial markets shape his perspectives.
- Writing Focus: He specializes in tech stocks, dividend-paying companies, ETFs, and value-oriented opportunities. His work emphasizes clarity, actionable insights, and education for investors at all levels.
- Investment Approach: Leo follows a disciplined, long-term investing strategy rooted in fundamental analysis, with a strong focus on economics, sector and industry research, and passive investing principles.
- Inspiration: Leo finds the stock market endlessly compelling and enjoys the challenge of separating meaningful data from noise. He’s passionate about analyzing what makes businesses stand out—and sharing those insights to guide informed investment decisions. As he puts it, “Performing strong analysis requires separating the wheat from the chaff.”
- Fun Fact: Leo credits his grandfather for 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 University of Washington