2 Oversold Restaurant Stocks Offering Strong Dividends

• Darden Restaurants fell 25% from peak to trough and now yields 3.3%.

• Goldman Sachs upgraded Darden to Buy with a $225 price target.

• McDonald’s shares are down over 5% from highs and yield 2.4%.

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It’s been a difficult past year for the broad basket of restaurant stocks, thanks to swift shifts in consumer tastes and higher operating costs. Undoubtedly, it feels like there’s no reason to believe that the fortunes of the fallen restaurant darlings will turn in 2026. Despite the uncertain consumer environment, though, there appears to be plenty of value to be had as well as dividend yields that are starting to get on the attractive side.

In a low-rate environment, perhaps the yield could be as much of a draw as the lower price of admission. Either way, this piece will look into a pair of oversold names that might be overdue for relief in the new year, especially if the U.S. economy stays robust while food inflation looks to drop further. In any case, there’s a low bar in place for many of the restaurant plays, and that alone might be enough to justify doing a little bit of buying, especially if you’re on the hunt for deeper value.

Darden Restaurants (NYSE:DRI) sports a 3.3% dividend yield after getting pummelled 25% from peak to trough last year. Now down close to 17% from all-time highs, the fallen restaurant play finally looks tempting to pick up, especially for those bullish on the consumer and their ability to trade up from fast food to fancier dine-in.

Recently, Goldman Sachs analyst Christine Cho gave the restaurant chain behind Olive Garden and Ruth’s Chris Steakhouse a nice upgrade to Buy from Neutral. With a $225.00 price target on the stock, Cho sees a good amount of upside in the year ahead. Undoubtedly, the restaurant’s exposure to the middle-income consumer was a reason behind the upgrade.

Additionally, Cho is a fan of the progress at Olive Garden as well as Longhorn Steakhouse. She’s right to point out the positive changes and the potential of such chains to take share. All considered, Darden stock does stand out as a compelling way to play increased spending in the middle-income consumer in the new year.

The stock trades at just 19.6 times trailing price-to-earnings (P/E), which seems too cheap for a firm that’s operating well with potential tailwinds that could kick in by the second half of the year. In short, it’s a great place to eat, and I envision lines at Olive Garden and other chains going outside the door.