Most investors have been right to focus almost exclusively on growth stocks during this long-standing bull market cycle. Indeed, many top high-growth tech names have outperformed the more boring defensive stocks in the market.
But one company I’ve continued to pound the table on in recent years that’s performed as well or better than many top Canadian growth stocks is Restaurant Brands (TSX: QSR). The company continues to provide steady and consistent cash flow growth, which it passes on to investors via a dividend the company appears well-positioned to continue increasing over time.
For those looking for a top way to lean into the uncertainty in the market right now, here’s why Restaurant Brands is a company investors may want to consider.
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Strong defensive business model
For those seeking a company with a truly defensive business model, a fast food operator like Restaurant Brands is an excellent choice. With world-class banners including Burger King, Popeyes, Tim Hortons, and Firehouse Subs under its umbrella, Restaurant Brands has a clear long-term global growth profile many investors are after.
Receiving its income from the franchise and royalty fees, as well as operational revenues from company-owned restaurants, this business model is certainly tilted in favour of investors. As consumers trade down to less expensive options when dining out, I expect Restaurant Brands could see market share growth in down economic cycles. Accordingly, for those looking to benefit from what may be an incoming recession or slowdown, this is a top way to play this trade.
Strong long-term growth prospects
Restaurant Brands aims to boost the store count from 31,070 in 2023 to 40,000 by 2028, with an annual addition of approximately 1,800 restaurants. The company also plans to revamp 600 of its newly obtained Carrols restaurants and expedite the expansion of Firehouse Subs in the U.S. and Canada.
Its primary emphasis for Popeyes is expanding its operating hours and making operational improvements. The company aims to increase Popeyes’s U.S. and Canada restaurant presence from 3,400 to 4,200 stores by 2028, all while enhancing its operational efficiency.
Based on the information provided in the company’s press release, Restaurant Brands International anticipates that these collective strategies will result in an annual 8% increase in system-wide sales. In addition, the company expects an estimated 3% growth in comparable sales and a 5% expansion in net restaurant numbers.
The verdict
Restaurant Brands International stands out as one of the top TSX stocks due to its defensive appeal. It protects investments during market downturns and the potential for higher returns over the investment horizon. In addition, the company’s anticipated growth in the coming years can potentially lead to a doubling of returns within the investment period.
