Restaurant Brands International and the Top Restaurants Stocks to Feed your TFSA
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.
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.
We are seeing lots of money going into reopening themes. Not early here. Relative to pre-covid, what is the environment? Compared to pre-covid on the 2-year chart, it looks like there is opportunity. However, it was already dipping pre-covid.
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.
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.
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.
Allan Tong’s Discover Picks Pizza chains are not the same, and we’re not talking taste. Pizza Pizza suffers from being a Canadian chain where reopenings will take longer to roll-out than in America. Though PZA trades at only 13.65x earnings and pays a 6.29% dividend, it’s also missed two of its last four quarters and…
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.
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,…
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.
Disappointing. Wage inflation, Tim's and Burger King issues, Covid, indebted. Bull case is acquisition of Firehouse Subs, with chance to grow globally. Other brands can grow globally with menu innovation, signage. Anemic valuation for growth rate. Nice dividend. At current levels, sell puts. Buy under $70. Stock probably doubles in next 5 years.
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.
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. They generate free cash flow and the valuation is fairly cheap now at 2.5x forward sales and 15x forward P/E. Liquidity is not great. If rates rise, the debt could become a problem and put pressure on their margins and balance sheet. Valuation is at…
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.
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. They announced a two year pilot to introduce the Pret brand in its restaurants. It would offer customers an alternative and the brand is popular abroad. A good move overall to diversify. Unlock Premium - Try 5i Free
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.
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.
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.
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.
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.
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.
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.
It hit an all-time high today and will continue to grind higher. Bears have avoided it for its high valuation, but they were wrong.
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.
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?
It was trading at $49 when a large order occurred; he started started buying $55 October calls. Today, it's making a nice 3-4% move. It's more than tripled since the Covid bottom. He will hold them for two months.
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.
They delivered this morning a huge EPS beat, beat revenues and 9% same-store sales growth, but the stock hardly budged. One reason was that management didn't issue guidance, because the environment is unpredictable, but also the stock has recently run up. Yum includes chains KFC and Pizza Hut.
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.
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.
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.
(A Top Pick Jan 29/21, Up 9%) Great holding. Still grew despite Covid. China growth has slowed. Still a growth story long term. A bit expensive now, wait a bit for a new purchase.