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Opinions The Panic-Proof Portfolio (Stockchase Research)
Keg Royalties Income FundKEG.UN.TOPAST TOP PICKJun 20, 2024
Stock price when the opinion was issued
As of Aug 12, 2025. Market Open.
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The Keg Royalties Income Fund (KEG.UN) is a $240M fund that invests in the Keg Rights Limited Partnership in connection with the operation and franchising of Keg steakhouse restaurants. It has a distribution yield of around 8%. Sales growth has mostly been flat over the past several years, cash from operations has shown a steady growth rate, but still quite modest. It pays around $14M each year in distributions, and its free cash flows have been around $28M. We would consider the distributions sustainable, and while its unit price has declined, its total return CAGR over the past 20 years is 8%.
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Premium contentWith an ROE of 24% and a solid dividend that is supported by cash reserves, we reiterate KEG.UN as a TOP PICK. A steady performing income fund that returns its cash as a dividend. We continue to recommend a stop at $13.50, looking to achieve $17.00 -- upside potential of 17%. Yield 7.8%
Premium contentPremium contentThis Vancouver based restaurant royalty has emerged thriving following the pandemic shut-downs. The company is prudently managing cash reserves to retire debt and support a strong dividend. Latest reported earnings showed a 14% increase in sales for the year to date. We recommend placing a stop-loss at $11.75, looking to achieve $16 -- upside potential of 18%. Yield 8.4%
Not widely followed and not very liquid. Overall this is a decent story. You would have to evaluate some of the story to Alberta and whether that is significant. A lot of these restaurant royalty funds have done quite well, because the consumer has proven that they are overspending like a drunken sailor on a shore leave.
Our PAST TOP PICK with KEG.UN has triggered its stop at $13.50. To remain disciplined, we recommend covering the position at this time. This will result in a net investment loss of 3%, when combined with our previous recommendations.