The Motley Fool

Forget Alt-Meat: 1 TSX Dividend Stock With 17% Upside Is a Buy

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Whichever way you slice it, Restaurant Brands (TSX:QSR)(NYSE:QSR) is a stock worth buying for its dividend yield of 3.23% as well as its discounted cash flow (DCF) value: Selling at around 17% below its DCF, the fast food giant could reward investors with some appetizing upside.

But how does Restaurant Brands stack up against another play for consumer staples upside, Beyond Meat (NASDAQ:BYND)? The alternative protein market is growing and could even go mainstream as cost efficiencies and a growing awareness of the climate crisis increasingly influence investor strategies and consumer behaviours.

Beyond Meat has a couple of data-driven buying points: Its earnings are forecast to grow by around 50% annually, and this follows on from a 240% earnings growth over the past 12 months.

The alt-meat trend is also likely to carry on growing and adding value to the consumer staples space. Indeed, for exposure to the high-growth megatrend of the green economy, Beyond Meat is a tempting play.

However, Beyond Meat stock sells at around 50% above its fair value, and with a P/B ratio of 18.8 times book, it would take a bold investor to see upside here.

In fact, with most of last year’s momentum behind it, this food stock looks past its best before date. While growth is certainly still on the cards for Beyond Meat, lower risk investors may want to wait for more of a pullback before committing to buying shares.

Given Beyond Meat’s recent listing on the NASDAQ and highly volatile share price, investors looking for alt-meat stocks may want to take a wait-and-see stance on this one.

Now let’s consider Restaurant Brands stock as an amply satisfying alternative to Beyond Meat. While it’s not the same type of growth stock that Beyond Meat was shaping up to be, and doesn’t exhibit the same momentum that the newcomer to the NASDAQ treated growth investors to last year, the owner of Tim Hortons, Burger King, and Popeyes is a buy for a steadier type of growth.

Restaurant Brands is also a solid play for a dividend stock portfolio ahead of a possible recession. With more than a few worrisome signs pointing to the reawakening of a full-blown bear market, snapping up stocks in the consumer staples space provides a strong strategy for defensive income.

Restaurant Brands stock is also a low-exposure play for Beyond Meat upside, since the restaurant owner, operator and franchiser is using its products in some of its menu items.

While this doesn’t replicate the high positive momentum of Beyond Meat, stacking shares in restaurant Brands negates some of the necessity of owning the alt-meat pure play itself.

The bottom line

While falling in and out of love with brands is nothing new, if consumers decide they’ve gone off alt-meat, then the industry could see investors lose their appetite.

Restaurant Brands is a far more diversified play, and with new entrants possibly crowding the alternative protein playing field, it might be safer to buy a dividend stock that can be bought and held for the long-term in a defensive portfolio of TSX assets.

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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 Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC.

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