For income investors, the only thing better than a fat upfront distribution yield is a fat upfront distribution yield that continues to grow at a quick and sustainable rate.
At the time of writing, the fund pays a bountiful 4.7% yield, but the most striking part of A&W’s security isn’t the upfront yield, it’s the magnitude of distribution growth enjoyed over the past decade, as well as the solid capital gains that have been as satisfying as A&W’s tasty new offerings.
When it comes to quality hamburgers, A&W is usually at the top of the list, especially for Canadians. The Burger family, a line-up of legendary classic burgers, is iconic and has found a spot with many generations over the course of decades.
While the good old classics and the frosted mug of A&W root beer would be enough to sustain impressive, fairly stable cash flows for many more years to come, the most compelling part of the A&W story is the fact that management isn’t stopping at its classics. It’s innovating, which is driving customers in its stores despite the fiercely competitive Canadian fast-food landscape that’s fighting for the lunch money of Canadians.
Consider the Beyond Meat burger, a vegetarian burger that uses plant-based proteins to replicate the taste and texture of meat. You’ve probably seen the televised ads touting the new Beyond Meat burger whereby burger-tasters have nothing but great things to say about the burger, and that they’re surprised it’s not real meat.
The Beyond Meat is a tasty burger!
I had the opportunity to try the new A&W Beyond Meat burger thanks to my girlfriend who’s a vegetarian, which pretty much makes me a vegetarian. But all memorable Pulp Fiction lines aside, A&W’s Beyond Meat burger, I believe, lives up to the hype and then some.
The burger tastes so much like real meat that it’s not only a “main attraction” at A&W for vegetarians, but it’s also now a go-to place for anyone interested in tasting the next big thing in strange, but satisfying food tech! The burger is that good, and although A&W doesn’t own the producer of the Beyond Meat patties, I think A&W’s management team deserves a round of applause for being one of the first popular Canadian burger chains to discover and incorporate the meat alternative into its menu.
Beyond Meat, a company that’s slated to have an IPO sometime soon, is quickly becoming a household name with other fast-food chains like Carl’s Jr. jumping onto the bandwagon. While A&W’s Beyond Meat burger looks like a mainstay item, I do believe the jolt provided by the burger will wear off, as A&W’s competitors incorporate similar great-tasting meat alternatives into their menus.
Foolish takeaway on A&W
A&W found a gem with Beyond Meat, and for that reason, they deserve a round of applause. Now that A&W has a robust line-up of beef, chicken (Chubby Chicken), and vegetarian options, system-wide sales look well-positioned to trend higher, so I think investors should expect even more generous distribution raises (and capital gains) over the short- to medium-term.
Stay hungry. Stay Foolish.
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Fool contributor Joey Frenette has no position in any of the stocks mentioned.