Fast-food stocks are a great place to invest in the face of profound uncertainties. Sure, markets are off to a fantastic finish to the year, with stocks steadily climbing towards their highs of the year. Though the TSX Index hasn’t been as hot as the Nasdaq 100 or S&P 500 exchanges, I do think that the value crowd can appreciate the Canadian index for what it’s worth.
With a fairly weak loonie at around (US$0.735), it can pay dividends to stick with the Canadian fast-food plays. That said, I also wouldn’t be afraid to nibble at some of the U.S.-traded ones if you’re looking for broader exposure to the space.
At the end of the day, the defensive corners of fast food make for terrific all-weather investments. And in this piece, we’ll have a closer look at a trio that may be worth a spot in your TFSA or RRSP going into the new year, which may or may not see a mild recession.
Yum! Brands
Yum! Brands (NYSE: YUM) is one of the fast-food firms that may be worth venturing south of the border for, even if the exchange rate isn’t in an ideal spot. The company is behind such brands as Kentucky Fried Chicken (KFC), Taco Bell, and Pizza Hut. Indeed, three very powerful and recognizable brands in just one stock.
Of late, shares have been quite cool, recently dipping, probably thanks to the rise of weight-loss drugs. In any case, I view the recent 10% correction in shares as an opportunity to grab three defensive cash cows at a nice discount. The stock trades at 23.6 times trailing price-to-earnings, with a 1.95% dividend yield.
A&W Royalties Income Fund
Speaking of great brands, A&W Royalties Income Fund (TSX: AW.UN) is behind one of the most robust burger chains in the country. The income fund sports a 6.1% distribution yield, which is more than worth grabbing after the recent multi-year slump in shares.
Sitting off 26% from their 2022 peak levels, I view the income fund as one of the most intriguing in the royalty scene right now. As a cash cow behind the iconic burger family, I’d look to nibble into further weakness over the coming year.
If you’re a fan of passive income, I think it’s hard to look past the name at these depths. It has been a challenging year, but things could change at a dime for the legendary brand.
MTY Food Group
MTY Food Group (TSX: MTY) is perhaps the spiciest food stock in this piece. It’s behind many quick-serve restaurants that are too numerous to name. Of course, the firm has exposure to the mall food court. And if the consumer feels pressure, mall traffic could take a hit. In any case, food court restaurants are dirt-cheap and may be a compelling place for window shoppers or bargain hunters, making MTY more defensive than it may receive credit for.
At 13.5 times trailing price-to-earnings, the stock looks like a dirt-cheap value stock that could rapidly rise once the economy heats up again.
