By HOWARD FINE Staff Reporter

Cheesecake Factory Inc. suddenly has started looking sweeter to investors.

But why? The casual dining category hasn’t seen a boom in business and the company’s results haven’t been off the charts. Nonetheless, stock of the Calabasas restaurant chain soared to a 52-week-high last week.

Analysts say the Calabasas casual dining chain’s dividend and share repurchase program have made the company more attractive.

For most of the last two years, shares were trading in the high $20-low $30 range. But since the 12-cent per quarter dividend announcement July 25, the stock has been trading for around $35; it closed Sept. 12 at $34.81. (See page 47.)

“The dividend announcement is bringing in a whole other class of investors that only buy dividend stocks,” said Bryan Elliott, senior restaurant analyst with Raymond James & Associates Inc. in St. Petersburg, Fla. “That and a strong balance sheet and a street-beating earnings performance has helped Cheesecake shares break out into a higher trading range.”

Also, the market rally has helped Cheesecake Factory’s shares.

“The consumer and restaurant stocks have been relatively strong – not because of the fundamentals improving organically, but from the hopes that further quantitative easing will lift the tide,” said Conrad Lyon, senior analyst with B. Riley & Co. LLC in West Los Angeles. The Federal Reserve Board last week announced economic stimulus measures.

Lyon said same-store traffic at casual dining restaurants has generally been flat and where traffic has increased, it has largely come as menu prices have dropped. At Cheesecake Factory, for example, lower-price, small-portion plates have become popular.

Cheesecake Factory’s second quarter earnings per share were 51 cents, beating the consensus estimate of 49 cents. A major reason: Food prices have been relatively low, helping keep costs down.

But that could change as Lyon said this year’s drought is expected to result in price increases of up to 5 percent for meat and dairy products, especially early next year.

Against this backdrop, Cheesecake Factory’s decision to return more cash to shareholders seems especially timely. But both the dividend and share repurchases have long been in the works. In the company’s July 25 teleconference call with analysts, Chief Executive David Overton said the company’s board had discussed the prospect of a dividend for at least a year but were waiting for the right moment to launch it.

“We wanted to make sure that we didn’t have other uses of the cash, that we would be able to continue the dividend indefinitely and that we felt we would be able to grow it over time,” he told analysts.

The share repurchases began earlier this year. Through the end of the second quarter, the company had completed roughly $60 million of the targeted $100 million in repurchases, according to spokeswoman Jill Peters.

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