Brinker International Inc. (EAT) recently announced a hike of 2 cents in its quarterly dividend to 16 cents per share, reflecting a 14.0% increase from the prior dividend payout. The increased dividend will be paid on September 29, 2011, to stockholders of record as of September 9, 2011.

Brinker has a consistent track record of paying dividends, and the latest hike brings the forward annual dividend yield, as of August 29, 2011, to 2.78%. Previously, in March 2010, Brinker had increased its quarterly dividend by 27% to 14 cents per share to boost shareholder value.

In a concerted effort to enhance shareholders’ value, the Texas-based company also has a share buy back program in place. In the fourth quarter, the company repurchased 2.5 million shares for a total of $62.9 million, thus bringing the total to approximately 20.6 million shares for $420.0 million in fiscal 2011.

In June 2011, the company’s board of directors authorized an additional $250 million for its current share repurchase program bringing the total authorization to $2,885 million. The program comes without an expiration date. Previously, in November last year, Brinker authorized an additional $325 million in shares repurchases.

Brinker’s forward annualized dividend yield of 2.78% has surpassed the industry average of 1.48%. It inched past the forward annualized dividend yields of 1.90% and 2.71% of restaurant biggies Yum! Brands Inc. (YUM) and McDonald’s Corp. (MCD), respectively. However, the yield of Brinker lagged Darden Restaurants Inc’s. (DRI) dividend yield of 3.75%, and the company recently hiked its dividend by 34%.

Further, Brinker has strong liquidity to support its share buyback and dividend distribution program. At the end of the fourth quarter, the company had current assets of $221.4 million.

We appreciate Brinker’s efforts to consistently return long-term shareholder and franchisee value even amidst slower economic growth. We believe that an increase in dividend payment affirms the company’s optimistic outlook and depicts that it is heading toward strong future growth.

The company currently owns, operates or franchises 1,579 restaurants under the names Chili’s Grill & Bar (1,534 restaurants) and Maggiano’s Little Italy (45 restaurants) and holds a minority investment in Romano’s Macaroni Grill. 

Brinker currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are maintaining our long-term Neutral recommendation on the stock.

Zacks Investment Research