When the market is soaring, we may forget what goes up also tends to come down. Indeed, many stocks go up in an escalator and down in an elevator. Hence, it is wise to prepare for a recession by investing in top defensive stocks on the Toronto Stock Exchange. Such stocks will protect your investment and enable you to earn stable returns even in market fluctuations. One such stock to consider, in my view, is Restaurant Brands International (TSX: QSR), a global conglomerate with a large restaurant portfolio.
Here’s more on why I think Restaurant Brands is a top play for investors looking for a dividend stock that provides defensiveness, value, and a strong growth profile as well.
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A brief overview
Restaurant Brands is among the largest fast-food or quick-service restaurant operators in the world. With more than 28,000 locations located across 100 countries, Restaurant Brands is best known as the parent company of world-class banners Tim Hortons, Burger King, Popeyes Louisiana Kitchen, and Firehouse Subs.
The company’s business model is relatively simple: it provides services and support to franchisees who run the company’s various locations in exchange for a slice of overall revenues. As the company continues to grow organically over time, Restaurant Brands stands to benefit from strong operating leverage and margins.
Additionally, as Restaurant Brands grows its footprint, particularly in new markets, the company stands to benefit even more from these long-term trends. From a financial perspective, this has led to strong results in the past and should continue to provide robust growth moving forward.
Speaking of financials
In the first quarter of 2024, Restaurant Brands reported strong system-wide sales growth of 8.1% year over year. The company’s net new restaurants grew by 3.9% as well, allowing the company to earn US$544 million in net income, up from US$477 million a year prior.
This strong revenue and earnings growth continues to support the company’s attractive 3.3% dividend yield and should bode well for income investors as the company seeks to raise its distribution over time.
Why is Restaurant Brands worth buying?
If we do have a recession on the horizon, investors who prioritize companies that can benefit from trade-down effects may outperform those focused on more highly cyclical names. That’s not a surprise to many who have already begun positioning their portfolios for periods of stagnant growth.
Many of the more cyclical stocks we’re seeing soar right now in the semiconductor sector, and other high-growth areas of the economy could cool. Accordingly, remaining market weight on many of these top mega-cap stocks could prove to be the wrong move as market dynamics shift.
In my opinion, Restaurant Brands provides the kind of business model long-term investors want to own through thick and thin. For those looking to stay fully invested in this market, QSR stock is one to buy for more defensive exposure right now.
