FAT Brands Inc Stock: Rare 21%-Yielding Restaurant Play
May 15, 2025
Overlooked Stock Offering Great Opportunity?
It’s very often the overlooked, unloved companies that quietly provide investors with the biggest windfalls. That’s why small-cap restaurant operator FAT Brands Inc (NASDAQ:FAT) could be worth a look.
To be honest, FAT Brands Inc stock looks messy. Over the past one year, the stock has dropped close to 35%.
The chart appears gloomy, with FAT Brands Inc stock trading below its 50-day and 200-day moving averages. This suggests that the short-term and long-term trends are pointing downwards and investor sentiment is extremely bearish.
I think that FAT Brands Inc stock could provide investors with serious solid income and capital appreciation, but lots of patience could be required with this investment.
What Does FAT Brands Do?
FAT Brands Inc is a global franchising company that owns a growing portfolio of quick-service, fast casual, casual dining, and polished casual restaurant brands in the U.S. and internationally.
Some of the restaurant’s brands owned by Fat Brands include “Round Table Pizza,” “Marble Slab Creamery,” “Great American Cookies,” “Hot Dog on a Stick,” “Pretzelmaker,” “Fazoli’s,” “Fatburger,” “Johnny Rockets,” “Elevation Burger,” “Yalla Mediterranean,” “Buffalo’s Cafe,” “Buffalo’s Express,” “Hurricane Grill & Wings,” “Ponderosa Steakhouse/Bonanza Steakhouse,” “Native Grill & Wings,” “Smokey Bones,” and “Twin Peaks.” (Source: “Profile,” Yahoo! Finance, last accessed May 6, 2025.)
All in all, Fat Brands franchises out and owns over 2,300 locations in 40 countries.
FAT Brands Inc Stock Offers Robust Dividends
Let’s get to the good stuff: FAT Brands Inc stock currently pays an annual dividend of $0.56 per share, which works out to a dividend yield of around 21% at today’s prices.
First of all, this sort of dividend yield is hard to find these days. Since the health crisis of 2020, FAT Brands Inc stock has been rewarding investors with $0.14 per share quarterly, like clockwork.
Then, you should know that FAT Brands’ dividend yield is much higher than what you’d get owning an index fund tracking the S&P 500. For some perspective, consider this: the S&P 500 has a dividend yield of just 1.27%. With FAT Brands Inc stock, you get 16.5X more.
Lastly, the dividend yield you see with FAT stock is rare among restaurant operators in the U.S.
Now, you must be wondering if the dividends are safe. Just keep in mind the company’s franchise business model. FAT Brands generates steady, royalty-based revenue. This gives it strong, recurring cash flow.
FAT Brands Firing on All Cylinders
Now here’s where a lot of investors get spooked.
If you look at FAT Brands’ financial performance, you’ll see it’s really ugly on the surface. The company has been reporting massive losses.
Here’s the thing though: the company’s net loss is mostly due to non-cash expenses, amortization, and interest expense tied to acquisitions—not a collapse in its operations. In fact, FAT Brands’ adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), a much better measure of business conditions, are decent.
But it doesn’t stop there: FAT Brands is actually firing on all cylinders.
While presenting the company’s financial performance for fiscal year 2024, and commenting on what’s ahead, Andy Wiederhorn, FAT Brands’ founder and chairman, said, “During 2024, we successfully expanded our footprint by opening 92 restaurants and signed over 250 new franchise agreements which increased our development pipeline to 1,000 locations. For 2025, we expect to add more than 100 additional restaurants across our portfolio. Our ability to grow demonstrates both strong consumer demand for our brands and the significant opportunities provided to our franchisee base.” (Source: “FAT BRANDS INC. REPORTS FISCAL FOURTH QUARTER AND FULL FISCAL YEAR 2024 FINANCIAL RESULTS,” Fat Brands Inc., February 27, 2025.)
And here’s what’s key for income investors: FAT Brands pays its dividend out of its cash flow, not accounting profits. And opening up more locations could lead to higher cash flow for the company.
Chart courtesy of StockCharts.com
What’s the Risk with FAT Brands Inc Stock?
It’s important for income investors to understand that, with higher yields, comes greater risk. FAT Brands Inc stock isn’t really a buy-it-and-forget-it dividend aristocrat. There are some risks that shouldn’t be overlooked.
There are four risk factors worth keeping an eye on with FAT Brands Inc stock:
- High debt = high sensitivity to interest rates
- An aggressive acquisition strategy that could backfire
- Company executives have had some legal troubles (e.g. current chairman/founder, as well as two former CFOs)
- Status as a small-cap company could lead to a liquidity issue; i.e. volume in FAT stock drying up could make it difficult getting in and out of the stock
The Lowdown on FAT Brands Inc Stock
In a world where everyone is chasing tech initial public offering and artificial intelligence unicorns, FAT stock offers something old-school: steady income, recurring royalties, and a frothy dividend yield.
Sure, the financials at FAT brands are messy on the surface, but the company is still firing on all cylinders. It’s pursuing an aggressive acquisition strategy that, while risky, has the potential to provide a massive windfall for the company…in turn, making FAT stockholders very happy.
As I mentioned earlier: FAT Brands is not for the faint of heart. However, if an investor can stomach a bit of volatility and has a long-term income focus, FAT stock might just improve their portfolio quite a bit.
