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.
A restaurant trust. This is a part of the market that he stays away from. A very tough business, cyclical, very hard to make money in the longer term.
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.
Has been suffering because of the increase in minimum wage in Ontario. Thinks the increase is a great idea. If you take people who are earning less than $12 an hour, and all of a sudden up their wages by $3 an hour, they are going to spend the money for the most part because…
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.
Pays a nice dividend yield and has a reasonable business model that keeps on grinding higher. Thinks it has been pushed a little bit ahead of itself in valuation because of the 5.8% dividend yield. Will probably continue to do well as long as they keep on opening stores. Very illiquid so he would be…
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.
This and Tim Hortons (THI-T) will profit from an economy that is going backwards, to some degree. A lot of the high dividend payers come out of very high multiples and cannot sustain their multiples.
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.
The franchise owners battle in the news is an overhang. He's sniffing at it now. Valuation has fallen to a reasonable level. But he needs to study it more.
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.
He can never get comfortable with the investment. The brands they acquired are second or third tier franchises. They have no high barriers to entry. Great CEO with good capital allocation. They have no experience in the US. He would not buy at this value.
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 Top Pick Nov 2/16. Up 5%.) The story is that it was sort of capturing millennials as they were one of the 1st burger chains introducing much healthier fare. As a much smaller chain, they can actually source enough of their healthy ingredients. It was doing incredibly well, but did suffer from lower oil…
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.
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.
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.
(Market Call Minute) It is high growth and high multiple so she can’t get around the valuation. The industry is highly competitive.
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 recently touched its last low. It's a so-so chart over the past 3 years. Hold it, but don't be a new buyer.
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.
High-quality organic food. Every once in a while there is a name that is very, very popular. This is the stock that has the most amount of excitement but also the most amount of volatility. Huge swings. But he feels it is time for some serious business and this is an area he feels investors…
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?
Top Short Expects to see a lowered guidance from same sales stores going forward. Extremely highly priced at 32 X earnings.
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.
52% of this company’s revenues come from China. The stock is trading at about 22X forward earnings with 12% long-term growth, giving it a 1.8 PEG ratio. Has a 2% dividend. Trading right at the 200 day moving average and where it goes from here is going to be interesting. Because of its relationship to…
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.
A quick serve restaurant. Trading at a very high multiple. Because she is a value oriented investor, the value is way too extreme. If you own, consider lightening up.
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.
They are trying to expand into other areas like salads. However, there are so many locations now that they could be cannabilizing each other. True, the company is doing really well, but is the stock doing very well? Look at valuation. Starbucks is in the low/mid-$20s. That said, China loves Starbucks and there's big opportunity…