Restaurant Brands International (TSX: QSR) had a challenging year in 2024, posting a negative return of about 6.5%. In contrast, the broader Canadian stock market returned close to 21%. With such disappointing returns, should investors be concerned about Restaurant Brands, or is this an opportunity to buy more in 2025? Let’s take a deeper look at what’s really happening with this fast-food giant.
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Historical performance: A long-term winner?
Despite a rough year, Restaurant Brands has been a strong performer over the long run. Over the last decade, QSR stock has outpaced the market with a compound annual growth rate (CAGR) of 9.9%, compared to the Canadian market’s 8.9% return. This suggests that if investors added to their positions during market corrections, they would have seen solid growth in a subsequent recovery.
The stock’s underperformance in 2024 could be viewed as a short-term blip in an otherwise solid investment track record. If you believe in the long-term growth of the fast-food industry, this could be the perfect time to buy while the stock is still relatively weak.
QSR and XIU Total Return Level data by YCharts
Q4 and full-year 2024 results: Mixed performance
The company’s fourth-quarter (Q4) and full-year results for 2024 were a mixed bag. While revenue and operating income grew significantly, other metrics were less impressive. In Q4 2024, system-wide sales growth slowed to 5.6% from 9.6% in the previous year, and comparable sales growth dropped to just 2.5%, down from 5.8% in Q4 2023.
For the full year, the slowdown was evident. System-wide sales growth in 2024 was 5.4%, a significant drop from the prior year’s 12.2%. Comparable sales growth similarly slowed to 2.3% in 2024 from 8.1% in 2023.
However, despite these declines, Restaurant Brands still posted impressive revenue growth of 20%, reaching US$8.4 billion, and operating income growth of 18%, hitting US$2.4 billion. Adjusted earnings before interest, taxes, depreciation, and amortization (a cash flow proxy) grew 9%, bringing the figure to US$2.8 billion, while adjusted earnings per share (EPS) increased by a modest 3.1%.
Dividend growth and future outlook: Stability amidst volatility
Despite slower growth in some key areas, Restaurant Brands continues to reward shareholders. The company recently raised its quarterly dividend by 6.9%, a clear sign of its commitment to returning value to investors. Over the past decade, QSR has been a responsible dividend grower, with a five-year dividend growth rate of approximately 3%.
At a price of about $94 per share at writing, QSR offers a dividend yield of roughly 3.7%. Analysts believe the stock could see a 14% appreciation over the next year, offering a total potential return of 18% when factoring in the dividend.
Restaurant Brands has also provided medium-term guidance through 2028:
- +3% comparable sales growth
- +8% system-wide sales growth
- Adjusted operating income growth to match or exceed system-wide sales growth
The Foolish investor takeaway: Should you buy, sell, or hold in 2025?
Given the dividend stock’s underperformance relative to the market and its reasonable valuation, investors should at least hold on to their shares. The 3.7% dividend yield offers stability, while the company’s long-term growth prospects remain intact. For those considering a more aggressive move, the current weakness in the stock could present an opportunity to add more shares for potential gains in the future.
In summary, Restaurant Brands International’s future appears solid. While 2024 may not have been a stellar year, the company’s long-term growth trajectory and commitment to returning value to shareholders make it a stock worth holding, or potentially even buying more of, in 2025.
