Down 28% But Still a Perfect Buy for Long-Term Passive Income

MTY’s nearly 30% pullback could be a buying opportunity. The franchisor’s steady fee income, growing dividend, and acquisition strategy point to durable long-term income.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published November 7, 2025 11:45 am EST

| More on: MTY

Key Points

MTY’s franchisor model earns stable royalty and fee income, shielding it from restaurant operating costs.
Shares are down about 28% from macro pressures, creating a potential income-buying opportunity.
Dividend growth and disciplined acquisitions support long-term compounding despite short-term headwinds.

When a dividend stock is down 30%, it can feel like a red flag. Yet for long-term passive income investors, it can actually be one of the best opportunities to buy. A share price drop doesn’t automatically mean the business is broken; sometimes it simply reflects short-term market pessimism, interest rate shifts, or broader economic uncertainty. So let’s look at what to consider when seeking out that perfect buy, and one dividend stock that fits the bill.

Close-up of people hands taking slices of pepperoni pizza from wooden board. — Source: Getty Images

What to watch

It’s important to remember that stock prices move faster than business realities. Markets are emotional, reacting to headlines, temporary earnings dips, or macro trends like inflation and rate hikes. But high-quality dividend companies are designed to ride out turbulence. If operations remain intact, a lower share price can be an opportunity to lock in higher income for years to come.

Another key reason a dividend stock can still be a buy even after a steep decline is dividend growth resilience. Some of the best income stocks have raised dividends through multiple recessions and market corrections. When a company maintains or increases its dividend during tough times, it’s telling investors the underlying business is healthy, even if sentiment says otherwise.

Furthermore, a 30% decline often resets expectations. It shakes out short-term traders and leaves behind patient investors who value cash flow over speculation. If you’re reinvesting dividends, the downturn can actually accelerate compounding. Over time, that reinvested income can turn a temporary drop into long-term growth. The key is distinguishing between a company whose fundamentals are eroding and one that’s simply caught in a broader sell-off.

Consider MTY

MTY Food Group (TSX:MTY) might not be the first name that comes to mind for passive income investors, but that’s exactly why it could be an opportunity. The dividend stock, best known for owning and franchising dozens of restaurant brands, has seen its shares fall roughly 28% over the past year. The share price may have dipped, but the company’s fundamentals, brand portfolio, and income potential remain firmly intact. MTY’s business model is built for stability, even in a challenging economy. As a franchisor, it earns most of its revenue from royalty and franchise fees rather than directly operating restaurants. That means it avoids the heavy costs of labour, rent, and food inflation that franchisees absorb.

Despite the dividend stock’s decline, MTY has continued to show consistent profitability and dividend growth. The dividend stock has raised its dividend repeatedly since initiating it in 2018, with its most recent increase of 18% at the beginning of 2025. Its payout ratio remains stable at 85%, giving it room to grow the payout over time, even if short-term pressures persist.

So why are shares down? Much of it has to do with macro headwinds, not company failure. Inflation and higher interest rates have squeezed consumer spending and raised borrowing costs, leading investors to steer away from discretionary names like restaurants. But these are cyclical challenges, not structural ones. The dividend stock has a long history of using downturns to its advantage, scooping up new brands at attractive prices and integrating them efficiently, fueling growth when others pull back. Long term, MTY’s growth strategy remains solid and scalable.

Bottom line

In short, MTY’s 28% share decline looks more like a temporary detour than a permanent setback. The dividend stock’s stable cash flow, disciplined acquisitions, and growing dividend make it a strong candidate for long-term passive income. In fact, here’s what a $7,000 investment could bring in on the TSX today.

COMPANY	RECENT PRICE	NUMBER OF SHARES	DIVIDEND	TOTAL PAYOUT	FREQUENCY	TOTAL INVESTMENT
MTY	$33.20	210	$1.32	$277.20	Quarterly	$6,972

Investors who focus on fundamentals rather than short-term market noise can use this dip as a chance to buy a reliable, income-producing business at an appealing price. For those willing to hold and reinvest dividends, MTY’s current weakness could become the foundation of steady compounding and capital appreciation for years to come.