Once in a while it pays to look beyond the usual suspects when choosing stocks for your RRSP investments.
Here are the reasons why I think A&W Revenue Royalties Income Fund (TSX: AW.UN) and Keg Royalties Income Fund (TSX: KEG.UN) deserve a closer look.
A&W
There is no shortage of hamburger restaurants in Canada, but that isn’t deterring A&W.
The brand has been around longer than most, and the chain continues to expand with more than 800 stores now serving up the company’s tasty burgers and famous root beer to hungry Canadians.
As young people shift toward healthier fast-food options, the continued success of might appear to be surprising, but the company has sticky commercials and is doing a good job of differentiating itself from the competition.
A&W sells beef raised without the use of hormones and chicken raised without antibiotics. Apparently, that’s hitting the right note with fast-food fans.
The company is also good at positioning itself in high-traffic public areas such as fast-food courts and highway road stops.
Finally, Boomers loved to hang out at A&W when they were teenagers and are still frequenting the restaurants today.
A&W just increased its monthly distribution to 13 cents per unit. That’s good for a yield of 5%.
The Keg
The first Keg opened in 1971 and Canadians have flocked to the popular restaurant ever since, gobbling up the famous steak, prime rib, and delicious bread.
The oversized bar remains a big draw for the after-work crowd in major cities, and Keg patios are always packed through the summer months.
The success is impressive given the change in consumer tastes over the years, but The Keg has stayed true to a system that works, and customers know they can always get great food served in lively atmosphere.
The chain currently has 100 restaurants in the Royalty Pool and reported solid Q1 2016 results.
Investors have watched the distribution climb steadily. The company raised the payout three times last year and handed out a special one-time distribution of seven cents in December.
Management just increased the distribution again, and the current payment of nine cents per month yields a healthy 6%.
