The Consumer Price Index (CPI) rose 2.2% year over year in April 2018 compared to the 2.3% increase in March. Prices at restaurants soared in the months of January and February with new minimum wage laws sparking a response from businesses. Grocery retailers have seen prices stagnate over the same period due to intensifying competition, which has prevented any significant price hikes.
Are restaurant stocks a good bet for investors as summer approaches? Let’s take a look at three top restaurant stocks today.
MTY Food Group Inc. (TSX:MTY)
MTY Food Group is a Quebec-based franchisor that operates under brands like Country Style, Big Smoke Burger, Cultures, and others. Shares of MTY have dropped 12.6% in 2018 as of close on May 28, but the stock has climbed 4.7% month over month. The company released its first-quarter results on April 9.
System sales in the first quarter increased 4% to $542.5 million with $48.5 million in growth coming from acquisitions. Same-store sales grew 0.7%, and EBITDA surged 22% to $19.9 million. Net income soared to $45.3 million over $2 million in Q1 2017 largely due to a one-time adjustment in the prospective income tax rate in the United States used to calculate deferred income taxes.
The company last announced a dividend of $0.15 per share, representing a 1% dividend yield.
Premium Brands Holding Corp. (TSX:PBH)
Premium Brands is a Richmond-based company engaged in specialty food manufacturing, distribution, and wholesale businesses with operations across Canada and in the United States. Its stock has climbed 13% in 2018 so far. Premium Brands released its first-quarter results on May 15.
The company saw revenue rise 22.3% year over year to a record $584.9 million with the organic volume growth rate coming in at 9.4%. It also posted a record adjusted EBITDA of $43.1 million, which represented a 12.2% increase from the prior year. Premium Brands posted adjusted earnings of $0.50 compared to $0.53 in Q1 2017, and it reaffirmed its sales guidance of $330 million for 2018.
The stock also offers a dividend of $0.475 per share, thereby representing a 1% dividend yield.
Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR)
Restaurant Brands International is the franchisor which owns the Tim Hortons, Burger King, and Popeyes brands. RBI stock is down 3% in 2018 so far, but shares have climbed 8.3% month over month. An internal battle between Tim Hortons franchisees and management has been a sore spot for RBI.
In the first quarter, RBI posted total revenues of $1.25 billion over $1.07 billion in the prior year. Adjusted EBITDA fell to $497.8 million from $506.3 million in Q1 2017. Burger King and Popeyes recorded double-digit system-wide sales growth, while Tim Hortons lagged behind at 2.1%. RBI promoted its “Winning Together” initiative, which aims to improve customer experience and drive sales going forward.
RBI also offers a quarterly dividend of $0.45 per share, representing a 2.2% dividend yield.
Are these stocks worth a look in June?
For me, the top two targets in this group remain Premium Brands and RBI. The latter offers the most attractive dividend, and system-wide sales have been encouraging in two of its top three brands.
