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Restaurant Brands International and the Top Restaurants Stocks to Feed your TFSA

Melisa R. H.Melisa R. H. Posted On May 9, 2019
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Restaurant stocks are usually purchased for their dividend payouts, although there are some growth names. There are various royalty income funds, or individual stocks investors can choose between. Some have a specific location base, and others are growing, aggressively entering new markets and expanding their global reach.

Although the discretionary spending in restaurant is cyclical, some companies have differentiated themselves, and have proven to remain consistent despite various economic cycles. Many of these restaurants are chain operations, and they continue to grow profitably in the long term.

Quick Service restaurants and casual diners makeup the majority of this list.

Here are the top restaurant stocks to buy in 2019.

🛍 Consumer

Canada

SIR Royalty Income Fund (SRV.UN-T)
A privately held restaurant trust with its base in the Greater Toronto area. They have some high-end restaurants in their portfolio.

SIR Royalty Income Fund (SRV.UN-T) — Stockchase
SIR Royalty Income Fund (SRV.UN-T) — Stockchase

A big drop of 30% recently has brought it back to long term support around $10.50. If it fell below $9.50, then it will probably fall to $7.50. Maybe a good buy opportunity here, but he would want to wait to see if it creates a basing pattern.

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Recipe Unlimited Corporation (RECP-T)
Some brands under the corporation include well-known brands including Harvey’s, Swiss Chalet and St-Hubert. It’s one of the largest restaurant chains in Canada. They brought in new management and made some acquisitions.

Recipe Unlimited Corporation (RECP-T) — Stockchase
Recipe Unlimited Corporation (RECP-T) — Stockchase

The old Cara operations. It has made some excellent acquisitions, including TheKeg restaurant chain. The problem is they hold a lot of assets in Alberta. The latest quarter was also impacted by the cold winter this year. He will continue to hold.

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Pizza Pizza Royalty (PZA-T)
They pay a nice yield although some analysts are beginning to question whether it is sustainable. They need to manage their cash flow in order to continue dividends. This is considered an income stock.

Pizza Pizza Royalty (PZA-T) — Stockchase
Pizza Pizza Royalty (PZA-T) — Stockchase

The yield is almost 9%, but he'd prefer a lower dividend with better growth. They are losing market share. Don't buy just for the yield. In fact, sell if the yield hits 10%.

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The Second Cup Ltd (SCU-T)
The Canadian coffee shop announced last summer that they were looking into converting their some of their coffee shops to cannabis shops. They say they are primarily focusing on western Canada, and now Ontario.

The Second Cup Ltd (SCU-T) — Stockchase
The Second Cup Ltd (SCU-T) — Stockchase

A company like this could come down towards the end of the year when there is tax loss selling. When they eliminated the dividend, he put it on his watch list. When he discovers a company, he does not buy into it for at least 6 months. When you see a takeover in the field,…

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Restaurant Brands International (QSR-T)
A Canadian multinational fast food holding company that holds Burger King and Tim Hortons. They recently launched a loyalty program with significant interest.

Restaurant Brands International (QSR-T) — Stockchase
Restaurant Brands International (QSR-T) — Stockchase

They stumbled in the early days getting franchisors aboard and are back-pedalling. He watches this. Covid has disrupted this industry and doesn't know where this will go. Food delivery to the door isn't that profitable and doesn't know if it has legs. Frankly, there are better places to invest money, like Boyd or Constellation Brands.…

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MTY Food Group (MTY-T)
A Canadian franchisor for casual dining. They have multiple brands including Thai Express, Sushi Shop and Extreme Pita. They are primarily in food courts and growth comes from acquisitions.

MTY Food Group (MTY-T) — Stockchase
MTY Food Group (MTY-T) — Stockchase

Top pick in May, up 161%. It is pricing in a nearly full recovery. It has run up to where it was. It is not an attractive buy today. He plans to hang on to it.

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A&W Revenue Royalties Income Fund (AW.UN-T)
People have been loving their plant protein line of burgers. A very well-run company with 900 Canadian stores. They pay a dividend of 4.5% and has a good track record of increasing it. They are adding more stores.

A&W Revenue Royalties Income Fund (AW.UN-T) — Stockchase
A&W Revenue Royalties Income Fund (AW.UN-T) — Stockchase

Stands out as one of the best run of the Canadian quick serves. Great growth strategy. Execute well. Hit by pandemic, but the dividend will come back. Short-term blip in a great long-term story. Hold it if you own it. Has potential to continue to surprise.

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Boston Pizza Royalties (BPF.UN-T)
The pizza chain pays a yield of 8.2%. However, investors worry about their 85% payout and whether the dividend is safe. They cut earning estimates by 2%. They were one of the first restaurant royalty income companies and grew rapidly. Same store sales have been lagging for them, but a turnaround might be possible.

Boston Pizza Royalties (BPF.UN-T) — Stockchase
Boston Pizza Royalties (BPF.UN-T) — Stockchase

Safer than a non-royalty stock? They pay out everything they earn at a 13.5% dividend yield. It's sold off sharply, because it is perceived that fast food chains will close down during this outbreak.

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Keg Royalties Income Fund (KEG.UN-T)
A high dividend paying stock with a yield of 6.47%. They are a leading operator of steakhouses and is one of the best managed.

Keg Royalties Income Fund (KEG.UN-T) — Stockchase
Keg Royalties Income Fund (KEG.UN-T) — Stockchase

It has been very well managed and has been one of the better performers. He is staying away from restaurants as they are expensive and have very little growth. This is one of the better ones, however. If you are happy with the dividend then hold on to it.

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Freshii Inc (FRII-T)
They have not done too well since their IPO. They also missed expectations and were hit during tax loss selling. They have huge potential if they are able to manage their operations better. Initial valuation during the IPO was considered to be high with hard targets to meet.

Freshii Inc (FRII-T) — Stockchase
Freshii Inc (FRII-T) — Stockchase

It has struggled since IPO. They are now optimizing their stores. They have had a hard time growing their profits. He would wait until they start to show some profit growth.

stockchase.com stockchase.com

United States

McDonalds (MCD-N)
The top restaurant stock in the world. McDonald’s remains a favorite among investors. The restaurant is considered to have the most convincing valuation amongst fast food companies. Same store sales are growing and there is more upside to come.

McDonalds (MCD-N) — Stockchase
McDonalds (MCD-N) — Stockchase

CMG vs. MCD - Why don't the stocks move in tandem if they're in the same business? CMG is going all-in with tech. CMG is more technologically savvy than MCD, though MCD is a good business. MCD is a dinosaur in comparison. MCD, though, is a great company.

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Chipotle Mexican Grill (CMG-N)
The company’s stock has improved and has bounced back due to changes being implemented by the new CEO. The restaurant has been focusing on product diversification and their loyalty program as well as improving core operations.

Chipotle Mexican Grill (CMG-N) — Stockchase
Chipotle Mexican Grill (CMG-N) — Stockchase

CMG vs. MCD: Why don't the stocks move in tandem if they're in the same business? CMG is going all-in with tech. CMG is more technologically savvy than MCD, though MCD is a good business. MCD is a dinosaur in comparison. MCD, though, is a great company.

stockchase.com stockchase.com

Cheesecake Factory Inc (The) (CAKE-Q)
A restaurant brand famous for their cheesecakes. They performed well but topped out and pulled back. The restaurant has struggled to grow and same store growth has plateaued. Is a comeback in sight?

Cheesecake Factory Inc (The) (CAKE-Q) — Stockchase
Cheesecake Factory Inc (The) (CAKE-Q) — Stockchase

Poor price momentum, though valuation is decent.

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Yum! Brands (YUM-N)
An American fast food company that operates KFC, Taco Bell and Pizza Hut. They are diversified globally and positioned in markets that have growing sales. China account for a big part of their revenues. They are now moving into India.

Yum! Brands (YUM-N) — Stockchase
Yum! Brands (YUM-N) — Stockchase

That the ongoing legalization in cannabis in the U.S. will push munchies stocks like YUM. Likes it very much. Better if they fix their Pizza Hut issues. Great to own.

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Shake Shack Inc (SHAK-N)
A fast casual restaurant chain that started In New York City. They recently announced that same-store sales have risen by 3.6%. They are investing in innovations and working on adding to their menu.

Shake Shack Inc (SHAK-N) — Stockchase
Shake Shack Inc (SHAK-N) — Stockchase

Time to add? They are only in 26 states so far, so there is a long playing field for SHAK-N. It trades at a high multiple, so if they disappoint it can become very painful quickly. Be cautious. He prefers to own the established names like SBUX-Q or CMG-N.

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Starbucks (SBUX-Q)
The world famous coffee shop that shaped coffee culture across the globe. They are a well run company that continues to innovate but their valuation has gotten quite high. There are also questions of where new growth will come for, but they’re sure to have a plan. Wait for a pullback and hold for long-term.

Starbucks (SBUX-Q) — Stockchase
Starbucks (SBUX-Q) — Stockchase

It's had a tremendous run. Wait until after they report next week. It would dip below $100.

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