Why Ruth's Hospitality Group Shares Jumped
May 3rd 2013 7:45PM
Updated May 3rd 2013 9:20PM
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Ruth's Hospitality Group were making investors feel at home today, gaining as much as 14% after topping estimates, and announcing a quarterly dividend in its report today.
So what: The parent of Ruth's Chris Steakhouse, and other restaurants, said adjusted earnings per share came in at $0.25, besting estimates by $0.06, and up from $0.15 a year ago. Revenues, meanwhile, were up 7%, to $107.4 million, beating expectations by 1.5%. Same-store sales at Ruth's Chris, the company's core franchise, were up 6.6%, but more importantly, Ruth's said it would start paying a $0.04 quarterly dividend, and authorize a $30 million share buyback program.
Now what: The new dividend payout gives Ruth's shareholders a modest yield of 1.4%, but investors will likely see future increases, especially if the restaurant chain continues to post more quarters like the one we just saw. For shareholders who got in last summer when the stock was trading around $6, the yield is a juicier 2.7%. The share buyback program also gives management the ability to reduce the outstanding share count by as much as 7.5% at today's closing price, thereby inflating the share value by the same amount. With strong same-store sales, a shareholder friendly cash strategy, and an improving macro environment likely to favor the high-end steakhouse chain, there's a lot to like here.
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