Should You Buy Restaurant Brands International Inc. (TSX:QSR) Stock or MTY Food Group Inc. (TSX:MTY)?

Prices at restaurants rose again in June, which could bode well for Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) and MTY Food Group Inc. (TSX:MTY) going forward.

| More on:

Earlier this year, I’d discussed the prospects for restaurant stocks in the midst of rising inflation. Higher CPI and the minimum wage hikes across Canada had upped prices in restaurants by 5% or more at the beginning of the year. Retail grocers have been forced to keep prices relatively static in comparison to compete in spite of higher inflation.

Reports in late 2017 showed that Canadians would spend more on dining out in 2018. Young consumers have driven this trend in many parts through the use of home food delivery applications like Uber Eats and SkipTheDishes.

Statistics Canada released the Consumer Price Index (CPI) for the month of June last week. The CPI rose 2.5% year over year in June, which represented the largest year-over-year increase in CPI since February 2012. Gasoline prices led the way, rising 24.6% year over year. Restaurant prices were one of the largest increases at 4.8% growth in CPI from the prior year.

Today, we are going to take a look at two restaurant stocks that have both demonstrated impressive momentum since the middle of spring. Which stock should investors bet on in the latter months of 2018?

Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR)

RBI stock has climbed 19.2% over a three-month period as of early afternoon trading on July 26. The stock is up 8.7% in 2018 so far. The company is set to release its second-quarter results on August 1.

RBI has been locked in a battle with its Tim Hortons franchisees for over a year now. The spat escalated in 2017 and started to gain mainstream attention with the formation of the Great White North Franchisee Association, which sought to push the interest of Canadian Tim Hortons franchisees against the parent company. Tim Hortons’s poor results in recent quarters have not helped the relationship. RBI unveiled its “Winning Together” plan in the first quarter, which will invest in store renovation and aim to boost profitability going forward.

RBI stock offers a quarterly dividend of $0.45 per share, representing a 2% dividend yield.

MTY Food Group Inc. (TSX:MTY)

MTY Food stock has also climbed 19.2% over the past three months. Shares are still down 1.4% in 2018 so far. The franchisor released its second-quarter results on July 11.

MTY Food reported a record high EBITDA of $35.5 million in the second quarter. The company has posted $14.5 million in growth year to date $3.4 million, of which was achieved organically. Net income also rose 13% in the second quarter to $18 million, or $0.72 per share. Same-store sales rose 1.8% in Canada but fell 1.6% in the United States, which the company attributed to cooler weather in March and April.

MTY Food owns and operates quick-serve chains, which have grown in popularity among younger demographics in comparison to the decline of casual in-house dining. The stock offers a modest quarterly dividend of $0.15 per share, which represents a 0.9% dividend yield.

Which should you buy today?

RBI has worked to address challenges at Tim Hortons with its ambitious investment plan, which was unveiled last quarter. Results have improved at Popeyes, and Burger King’s performance has been consistently excellent. I like RBI to overcome its issues at Tim Hortons over the next year. Investors should monitor its next round of results — in particular the performance at the beleaguered fast-food chain.

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.

More on Investing

food restaurants

Fast Food Stocks Could Pass Food Inflation to Consumers

Fears of a recession are rising. Fast food chains like Pizza Pizza (TSX:PZA) could be recession-resistant.

Read more »

Glass piggy bank
Stocks for Beginners

RRSP Investors: How to Make More Money But Earn Less (in the CRA’s Eyes)

The RRSP is great for saving for your retirement, but it also provides you benefits right now that will lower…

Read more »

Bank Stocks

Should You Buy Royal Bank Stock Now?

Royal Bank just reported solid fiscal 2022 earnings. Is the stock a buy today?

Read more »

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

TFSA Investors: How to Max Out Before the New Year!

Investors should try and max out on their TFSA while they can. Here are ways to do that, plus an…

Read more »

grow dividends
Dividend Stocks

Growth or Passive Income? Get Both With This Top TSX Stock

This top TSX stock offers growth, income and protection during a potential recession. What's not to love?

Read more »

Senior couple at the lake having a picnic
Stocks for Beginners

TFSA Investors: 2 Top Stocks to Buy in December and Hold Forever

The year 2022 is going out in a bearish mode. Here are some stocks to buy in December at a…

Read more »

four people hold happy emoji masks
Stocks for Beginners

3 Stocks You Can Keep Forever

Buy these stocks, set them, and forget them for decades for so much income you won't know what to do…

Read more »

Tired or stressed businessman sitting on the walkway in panic digital stock market financial background
Bank Stocks

3 TSX Stocks to Buy Before the New Year

These three TSX stocks offer the best opportunity for quick growth in 2023, because each has nicely rebounded before.

Read more »