As far as the top Canadian stocks that investors are looking at right now and considering a ‘screaming buy’, I’d say Restaurant brands (TSX:QSR) should be a topic of discussion for most investors.
This is a company with a very defensive business model that is seeing strong interest from billionaire hedge fund managers. If the smart money gets a relatively overlooked name, that’s a very good sign.
Here are three of the top reasons why I think Restaurant Brands is finally getting the attention it deserves, and where this top fast food giant could be heading next.
Solid income means impressive returns
Systemwide sales growth across the company’s portfolio of fast-food chains saw solid momentum last quarter. Restaurant Brands experienced total year-over-year growth of 6.9%, with comparable sales growth of 4% over the same period. These are strong figures for a company with very well-established locations in mostly developed markets.
Importantly, strong returns from the company’s global operations (ex-North America) drove most of these returns. Growth from markets in Western Europe, China and Japan drove system-wide revenue growth of 12%, and this is the key area I think investors will continue to focus on.
Strong earnings and cash flow prospects
This growth has led to strong fundamentals, with Restaurant Brands maintaining a free cash flow margin of approximately 25% last quarter. With these types of margins, the company has plenty of room to continue returning capital to shareholders through dividends and buybacks, which the company plans to do.
Restaurant Brands remains one of my top dividend stocks, with a 3.6% dividend yield supported by strong long-term growth prospects. With solid margins and cash flows supporting financial flexibility and the potential for future dividend increases, there is a lot to like about this company’s long-term capital growth and total return profile.
The prospects remain promising
While other companies may see a deteriorating outlook in the context of a consumer devaluation, companies like Restaurant Brands are in the driver’s seat to benefit from these macro shifts.
The company’s status as a lower-cost option for people looking to eat out, and the brand loyalty that Restaurant Brands has been able to generate over the years, could drive outsized returns compared to its peers in the coming months and quarters.
For investors looking for long-term stocks to add in this current environment, Restaurant Brands remains one of my top picks right now. This stock looks very attractive relatively speaking, and I will continue to hammer this name until something material changes in the thesis.
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