Should You Add These Restaurant Stocks to Your Portfolio in June?

MTY Food Group Inc. (TSX:MTY) and other restaurant stocks may be worth a look as we head into June.

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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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool owns shares of MTY Food Group and RESTAURANT BRANDS INTERNATIONAL INC. MTY Food Group is a recommendation of Stock Advisor Canada.

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