Tim Hortons’ Parent vs. McDonald’s: Why This Canadian Giant Has the Edge

Let’s do a compare and contrast of McDonald’s (NYSE:MCD) and Restaurant Brands (TSX:QSR) to see which company has the edge.

McDonald’s (NYSE: MCD) is perhaps the best-known fast food giant in the world. Its namesake restaurants cover the globe, and the company has one of the most valuable brands in the world as well. Accordingly, McDonald’s continues to generate the lion’s share of the attention in this space, and for good reason.

That said, Canadian quick service restaurant parent Restaurant Brands (TSX: QSR) remains a top option as well for investors looking to gain exposure to this space. Restaurant Brands is the parent company of Tim Hortons, Burger King, and Popeyes, and is another titan in the fiercely competitive fast-food sector. Although McDonald’s has long held the top spot in the world, Restaurant Brands is emerging as a strong rival, especially when viewed through the lens of the Toronto Stock Market. 

Let’s dive into which company may be the better pick, and why I’m inclined to lean toward the Canada-based company, at least for now.

An analyst uses a computer and dashboard for data business analysis and Data Management System with KPI and metrics connected to the database for technology finance, operations, sales, marketing, and artificial intelligence.

Source: Getty Images

Portfolio diversification matters

Just as is the case for individual investors, having one’s eggs spread across multiple baskets is generally a good thing in the world of investing. For companies, having diversified income streams can help level any near-term turmoil that arises in a particular sector.

This is one of the key differentiating factors between McDonald’s and Restaurant Brands I think is worth pointing out. Restaurant Brands has done a good job of adding different banners under its umbrella which service different markets. And while the company’s brands certainly don’t compare to that of McDonald’s, it’s also true that these are banners that are becoming much more recognized around the world.

As Restaurant Brands continues to expand globally, one could argue that their footprint is likely to expand much faster than McDonald’s, which has already gone through the majority of its growth cycle thus far.

Financial performance improving

McDonald’s is going to be the winner if one looks at both companies’ underlying fundamentals right now. Restaurant Brands has seen some missteps in past quarters, and the company’s share price has been dinged accordingly. On the flip side, McDonald’s stock price is trading at its all-time high, and the company appears to be firing on all cylinders.

The thing is, I think Restaurant Brands has plenty of room for improvement in the coming quarters, and the company’s valuation multiple is much more attractive when compared to McDonald’s (a forward price-earnings ratio of 12.5 times compared to McDonald’s 25 times).

Bottom line

In terms of the balance of risks at play between the two companies, I think the clear winner from a valuation perspective is Restaurant Brands. Additionally, this is the superior dividend stock, with QSR stock providing investors with a 3.7% yield compared to McDonald’s 2.3%.

Over the long term, both companies should continue to provide relative portfolio stability. But if I had to pick between the two, QSR stock looks much more attractive right now relative to MCD stock.

Fool contributor Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Printing canadian dollar bills on a print machine
Dividend Stocks

Buy This Little-Known Cash Machine for Your TFSA

Buy this lesser-known TSX real estate stock to earn attractive monthly dividends in your TFSA while benefiting from its growing…

Read more »

young people stare at smartphones
Dividend Stocks

BCE vs. Telus: Which Telecom Stock Has the Better Dividend Outlook After Q3?

BCE and Telus both cut their dividends over the past 18 months. After Q3, see which Canadian telecom stock has…

Read more »

Muscles Drawn On Black board
Dividend Stocks

Dividend Powerhouses: Top Canadian Stocks to Enhance Your Portfolio

These two Canadian dividend powerhouses offer attractive yields, encouraging earnings trends, and growth opportunities that could strengthen your portfolio over…

Read more »

A series of red ladders lead to successively higher levels
Dividend Stocks

Is Brookfield Stock a Buy, Sell, or Hold for 2027?

Is Brookfield stock a buy, sell or hold for 2027? Explore its latest earnings, insurance expansion and potential for long-term…

Read more »

Traffic jam with rows of slow cars
Dividend Stocks

1 Magnificent Canadian Stock Down 59% to Buy and Hold Forever

Boyd Group stock is down 59%, yet Q2 sales topped US$1 billion and margins hit 13.4%. See why this TSX…

Read more »

diversification is an important part of building a stable portfolio
Dividend Stocks

Build a Lucrative Passive-Income Portfolio With Just $35,000

You can build a rewarding passive-income portfolio with just $35,000 by investing in these two attractive TSX dividend stocks, offering…

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

How Much Would You Need in a TFSA to Replace a $500 Monthly Bill?

Replacing a $500 monthly bill starts with a realistic capital target and an income plan that can grow.

Read more »

Happy golf player walks the course
Dividend Stocks

2 TSX Dividend Stocks to Consider Now for Steady Passive Income

With established business models, reliable cash flows, a strong dividend track record, and clear growth prospects, these two stocks stand…

Read more »