Finding unique buying opportunities in any market is what we’re all after. There are plenty of overlooked companies, or ones which have been beaten down for one reason or another, that some investors may rightly think are worth buying for the long term.
Of course, buying any stock when it’s down or the trends aren’t pointing in the right direction is a difficult task. There will always be some amount of doubt in the back of investors’ minds, as the market twists and turns.
But those companies with rock-solid balance sheets and consistent cash flow growth should outperform those with less-clear profitability outlooks over the long term. Here’s one top Canadian stock I think investors will kick themselves for not owning a decade from now.
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Restaurant Brands
In the world of fast food giants, Restaurant Brands (TSX:QSR) is a company I’d argue ought to be a top choice in this current market environment.
Unlike other U.S.-focused peers that have surged of late as the trade-down narrative picks up steam, Restaurant Brands hasn’t seen the same sort of price appreciation as of late. What that has meant is that investors looking to pick up shares of the Tim Horton’s and Burger King parent can do so at roughly the same levels as mid-2023.
Despite two years of very reasonable growth and plenty of capital being returned to investors, I’d say that’s a good deal. And considering the company’s past dividend increases, that means investors now have the opportunity to pick up shares of this dividend stock providing a 3.7% dividend yield.
This yield, in combination with strong expected future growth, should lead to double-digit annual total returns over the long haul. That’s my base case at least, in my own personal model.
Why is now the right time to step in?
In my view, market forces are starting to favor investors who are willing to take more of a defensive approach in this market.
We’re all uncertain as to where monetary and fiscal policies will be headed from here. On the one hand, inflation remains a concern around the world. On the other hand, there are questions around slowing job growth and whether the recessionary headwinds we’re seeing start to materialize will manifest into something worse down the line.
On that front, consumers (even higher-income consumers) do appear to be trading down. For those looking for exposure to companies with the ability to capture greater market share in such a trade-down environment, I’d argue that lower-cost providers of dining experiences (such as Restaurant Brands) are a great place to start.
This is a company with a solid balance sheet, a very reasonable dividend yield, and a long-term capital return profile that outpaces many other consumer discretionary stocks.
To me, Restaurant Brands is a screaming buy right now.
