The Motley Fool

A Growth Stock of a Lifetime: Don’t Miss Out on its Dividends, Too

Image source: Getty Images

Growth stock Restaurant Brands International (TSX:QSR)(NYSE:QSR) began its recovery after reporting its Q4 and full-year 2019 results, despite Tim Hortons having experienced a comparable sales decline.

Here are the actual results.

Tim Hortons the tempered

A lot of Tim Hortons fans have obviously turned their backs on the quick-eat joint. Tim Hortons’s system-wide sales declined 2.9% in Q4 2019 (against Q4 2018’s growth of 2.4%) to nearly US$1.7 billion.

Additionally, the quarterly sales decline was way worse than the full-year 2019 decline of -0.3%. This momentum can continue into 2020 if Timmies isn’t able to “focus on its fundamentals and founding values,” as it said it would in the press release.

Meanwhile, Restaurant Brands added 86 net new Tim Hortons restaurants in 2019.

Burger King: A fitting king

Among Restaurant Brands’s three brands, Burger King pulled in the largest system-wide sales of US$22.9 billion in 2019. Burger King makes up almost 70% of Restaurant Brands’s total restaurant count!

Burger King also saw a high single-digit system-wide sales growth of 9.3% for the year, thanks partly to having the strongest year of restaurant growth in the last 20 years, as it added more than 1,000 net new restaurants during the year.

Eye-popping growth at Popeyes

Popeyes Louisiana Kitchen experienced eye-popping system-wide sales growth of 42.3% in Q4 2019, which drove its system-wide sales growth to 18.5% for the full-year 2019. Popeyes attributes the growth to the launch of an iconic chicken sandwich.

But we shall see in the coming quarters whether it’s a fad or not.

Meanwhile, Restaurant Brands added 214 net new Popeyes restaurants in 2019.

Consolidated results for 2019

Restaurant Brands’s 2019 system-wide sales growth was 8.3%, net restaurant growth was 5.2%, adjusted earnings per share increased 3.4% to US$2.72, adjusted EBITDA increased organically by 6.5% to US$2.3 billion, and free cash flow was $1.4 billion.

Growth ahead

There are about 18,800 Burger King restaurant locations but fewer than 5,000 of Tim Hortons and about 3,300 of Popeyes. If there’s room to add Burger King restaurant count, there’s much much more room to add Tim Hortons and Popeyes globally.

QSR stock is a growth story that will span across decades.

Valuation

The growth stock is still a meaningful way (about 14%) down from its 52-week high and trades at a good valuation for long-term double-digit growth.

Therefore, investors who believe in the value that Restaurant Brands brings (or will bring) to its customers should consider buying some shares, as it’s turning around Tim Hortons and growing its other brands.

QSR is already showing strong growth at Burger King and Popeyes. Imagine how formidable it will be when it turns Timmies (and its old fans) around.

Investor takeaway

Restaurant Brands stock has resilience because it offers cheap eats. It also has growth potential, because of its international expansion story.

Importantly, QSR is a cash cow. The capital-light business only had capital spending of US$62 million in 2019, which was less than 5% of its free cash flow, while its payout ratio (of free cash flow) was 64%.

Therefore, its dividend is safe, and it was able to raise its quarterly dividend by 4% to US$0.52 per share and now yields about 3.1%. Shareholders can expect many more dividend increases in the future. Since 2015, QSR stock has more than quadrupled its dividend!

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada's market-beating team has just released a brand-new FREE report revealing 5 "dirt cheap" stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don't miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

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 Kay Ng has QSR shares. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss an important event.

Iain Butler and the Stock Advisor Canada team only publish their new “buy alerts” twice a month, and only to an exclusively small group.

This is your chance to get in early on what could prove to be very special investment advice.

Enter your email address below to get started now, and join the other thousands of Canadians who have already signed up for their chance to get the market-beating advice from Stock Advisor Canada.