Who would have thought September would see more of the same for the broad TSX Index, which now finds itself up 2% in the past week and over 6% in the past month. Undoubtedly, if you were startled out of stocks amid the August choppiness, you missed out on an incredible past-month run that probably would have been considered decent enough for the full calendar year.
Either way, timing the market remains a bad move, and while risks are present, I would seek to deploy capital over time rather than waiting for the perfect moment. Indeed, it’d be ideal to put a lump sum into stocks after a correction hits. But with inflation lingering, keeping too much cash on standby, I think, is an underrated risk disguised as prudence for many younger investors who are better able to roll with the punches once they inevitably come their way.
Either way, for those feeling discouraged about not having bought before the September rally (I’d imagine many were feeling a bit hesitant given the scorching summer melt-up in stocks), there are several catch-up plays that still go for a pretty attractive multiple. And in this piece, we’ll feature one name that I view as still stuck in the TSX bargain bin.
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Restaurant Brands: A 3.9% yielder to pick up as it attempts to recover from a fall to 52-week depths
Enter shares of Restaurant Brands International (TSX:QSR), the fast-food firm best-known for being behind such names as Tim Hortons, Burger King, and Popeye’s Louisiana Kitchen. Undoubtedly, the entire quick-serve restaurant industry has felt pressure amid inflation and challenged consumer sentiment. Indeed, fast food has not been spared from the price hikes, and while the value proposition is getting harder to communicate in today’s post-inflation world, I do think that the damage done to the fast-food brands is now well overdone.
Inflation is cooling, and there’s a bit of a fierce battle to win back the casual diner. Could it evolve into more of a pricing war? Potentially. Either way, menu innovation is another way that Restaurant Brands and the broader industry can get back on track.
Menu innovation and value are key to overcoming industry headwinds
Whether we’re talking about Tim Hortons’ Protein Lattes (my favourite new menu item!) or the new seasonal Thanksgiving Stack, an interesting sandwich featuring turkey, stuffing, and cranberry, I think the hard-hit Canadian café and bake shop is getting on the right track. As value and creativity look to drive store traffic at Tim Hortons and its other brands, I think it’s hard to bet against the likes of a Restaurant Brands, which appears to trade at a hefty discount, at least in my view.
The stock recently plunged to 52-week lows but is now attempting to regain some ground. Time will tell if there are enough catalysts to fuel a breakout. Personally, I think the stock is way too cheap at 24.4 times trailing price-to-earnings (P/E) for the quality dividend (3.9% yield) and given the potential for Tim Hortons to leap over a low expectations bar that’s been set ahead of it following its tough second quarter.
The bottom line
If you’re looking for a low-cost growing dividend, I think QSR stock is worth buying and holding for years at a time, especially now that expectations are in such a modest spot.
