If you’re a value-conscious dividend hunter, the TSX Index is a great place to look, even as Canada tests recession territory, possibly at some point over the next year. Undoubtedly, macro headwinds are quite prominent. But even if Canada falls into a recession, various pundits think it’ll be a mild one. Indeed, even a mild recession could spell trouble for investors provided they overpaid for shares of a company that could face earnings hurdles in the quarters ahead.
Though discretionary stocks are sure to be a choppy ride, I’d much rather be in the defensive plays. Not only are the dividends appealing (who can resist the tasty yields), but they also have pretty defensive growth narratives that may be a little rattled by any sort of coming downturns for the economy.
Without further ado, let’s check out three of my favourite restaurant stocks to play for 2024 and the next 10 years.
Restaurant Brands International
Not all restaurant stocks are created equally. Some stand taller than others, especially in times when macro headwinds are hitting consumer wallets.
Restaurant Brands International (TSX: QSR) is enjoying a massive comeback (shares up 48% in two years) after years of flying under the radar of shinier fast-food firms that have delivered more on the returns front. On Monday, the stock blasted more than 2% higher to $105 and change per share. With a potential breakout, which I called in a prior piece, potentially on the horizon, the stock’s 2.84%-yielding dividend may stand to compress to around 2-2.5%.
Indeed, capital gains can drag down the dividend yield. And as more investors pound the table on the company’s transformative efforts (especially over at Burger King), I’d look for QSR stock to outpace rivals in the quick-serve restaurant scene.
MTY Food Group
For those who seek greater value, MTY Food Group (TSX: MTY) may be more appealing, with shares going for just 15.2 times trailing price to earnings. That’s way too cheap for a company behind numerous food court restaurants like Taco Time. Last week, the company announced a hike in its dividend by a whopping 12%.
With a yield just shy of the 2% mark, MTY stands out not only as a great income play in the present but also as a future dividend-growth juggernaut. With shares delivering flat (up just 3.7% in the past two years) results amid its multi-year period of consolidation, I’d look to be a net buyer for a potential breakout. At this juncture, I expect MTY stock could have what it takes to stand taller than the broad TSX Index.
Pizza Pizza Royalty
Finally, we have Pizza Pizza Royalty (TSX: PZA), which pays a nice 6.31% yield at the time of writing. Technically, it’s not a dividend but a royalty that income investors stand to collect. Either way, shares of the royalty play are up big over the last two years, rising more than 25% over the timespan.
As one of the lower-cost pizza delivery options in Canada, it’s not hard to imagine why shares have done so well. Macro headwinds and inflation call for better value, and in terms of competitive prices, it’s been hard for Pizza Pizza’s rivals to challenge it.
Even if Pizza Pizza’s prices are less than some of its U.S. peers, the quality is still pretty decent. And for a large family without dinner plans, Pizza Pizza stands out as a great choice, not only to get their pizza fix but to save a few bucks in the process. Tasty pizza, tasty value proposition, tasty yield — what’s not to love if you’re a passive-income investor?
