Blue Plate Special? Restaurant Brands Stock Is Down 16%

Restaurant Brands International (TSX:QSR) stock looks to be on sale for blue-chip dividend seekers.

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The quick-serve restaurant scene has been a tough place to operate of late. Still, not all industry players have sailed lower amid the industry’s falling tides. Some fast-food firms have been able to post remarkable results in spite of a pickier consumer.

As companies look to report in the face of relatively muted estimates, perhaps passive income investors seeking a bang for their buck (and solid long-term growth prospects) may finally have enough reasons to back up the truck.

Restaurant Brands stock looks to be on sale after adding to its recent correction

Shares of Canadian fast-food darling Restaurant Brands International (TSX:QSR) have been treading some water recently, even after a decent quarter that I thought should have kicked off a sustained surge to new all-time highs. At the time of writing, shares of QSR are going for just $93 and change, well off of its more than $111 per share highs. At this juncture, QSR stock looks like one of the best buy-the-dip value plays in the entire TSX Index.

While Restaurant Brands has not been immune to higher costs from pretty much across the board, I’d argue that management has done a pretty respectable job of managing such cost-related headwinds. Many consumers will stop frequenting a restaurant if the price is not right. Who can blame them after all the inflation we’ve been through?

In any case, the value proposition at Tim Hortons, Burger King, and Popeye’s Louisiana Kitchen is shining through massively. And if it stays that way (all signs suggest the high perception of value isn’t going anywhere), each of QSR’s chains may just be able to make big strides over its competitors.

With Restaurant Brands stock now down more than 16% from its all-time high, I’d look to be a net buyer rather than a seller.

There’s really nothing fundamentally wrong with the growth story. In my opinion, the stock has gone bust, not the company itself, which has performed exceptionally lately. In fact, an argument can be made that Restaurant Brands’ growth narrative looks better these days as it looks to invest in initiatives to drive same-store sales growth (SSSG) across its trio of robust chains.

Don’t ignore recent strength at Tim Hortons, folks!

Perhaps the most remarkable part of Restaurant Brands’ last quarterly earnings beat was the fact that Tim Hortons had the opportunity to show it can be a source of strength in tough times. For the fourth quarter, Tim Hortons was a driver, not a laggard, thanks in part to prior investments and the willingness to step outside of the comfort zone with new products.

In a prior piece, I highlighted how Tim Hortons’ pizza was an intriguing way to attract more customers. It’s not exactly a menu item you’d expect from the iconic café and bakeshop. Nonetheless, Tim Hortons’ willingness to think outside the box is likely to account for the chain’s strong sales in a gloomy environment.

As a great place to eat out and stay within one’s budget (a personal flatbread alongside a coffee and donut certainly will not stretch one’s budget too far!), I expect Tim Hortons to be a prime share-taker in this environment. Yes, Tim Hortons will garner quite a few critics for unorthodox offerings. But at the end of the day, if they’re making sales, you have to commend management.

The Foolish bottom line

Though inflation is closer to normalization (hello, 2%), consumers’ perception of value is unlikely to change. As such, Tim Hortons, Burger King, and Popeye’s, I believe, are positioned to keep doing well from here. The dividend yield of 3.36% looks incredibly attractive, as too does the mere 17.7 times trailing price-to-earnings (P/E) multiple after a 16% flop that I personally find to be a pricing blunder made by Mr. Market.

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 Joey Frenette has positions in Restaurant Brands International. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.

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