1 Canadian Dividend Stock I’d Buy Before Inflation Heats Up Again

Restaurant Brands International (TSX:QSR) stock looks like a dividend winner that can keep it up despite inflation.

Key Points
  • With food inflation still high and energy shocks adding uncertainty, stocks—especially steady dividend payers—can help protect your purchasing power.
  • Restaurant Brands looks like a strong inflation-resilient pick, with a 3%+ yield and improving execution that’s driving sales while holding up margins through higher costs.

Inflation, especially food inflation, has been lingering for quite a while. It’s the “new normal,” so to speak, to have price increases in the ballpark of 3% or even significantly more, depending on the good we’re talking about. With the sudden oil shock at the hands of the conflict in the Middle East and the blockage in the Strait of Hormuz, it certainly doesn’t feel like disinflation is going to set in anytime soon.

Indeed, the budgets of Canadian consumers have really been challenged. And while oil prices have nosedived in recent weeks, thanks in part to renewed hopes for a peace deal and a timely reopening of the Strait of Hormuz (it’ll take a while to get flows back to where they were, but nevertheless, reopening hopes seem to be rising), it’s tough to tell how much of the price-driving pressures are already irreversible.

groceries get more expensive as inflation rises

Source: Getty Images

It’s tough to deal with lingering inflation

At the end of the day, the plunge in the price of oil is hopeful, but it seems doubtful that $50 per barrel will be back on the table at some point in the second half. Although I suppose stranger things have happened. In any case, time will tell how supply re-entering the market will affect oil and what impact it’ll have on prices and the rate policy of central banks. In any case, stocks are the best way to help your portfolio combat inflation.

And while just about any flavour of stock (think growth, dividends, low-beta, and everything in between) can help you move ahead on an after-inflation basis, I do think that the hefty dividend payers are worth a second look, especially as inflation becomes a problem again and the Bank of Canada looks to keep things on pause rather than hiking rates before an inflation storm has a chance to hit.

Restaurant Brands can keep winning despite industry headwinds

Restaurant Brands International (TSX: QSR) may very well be one of the best bets to help you get a solid, growing dividend. The stock yields a decent 3.4% at the time of this writing. But, what’s more, is that the company is finding ways to win big in a hard market that’s challenged margins.

Indeed, when food inflation and labour costs rise, the answer isn’t as simple as passing it on to consumers in the form of higher prices, especially given how price-sensitive the consumer has become when it comes to dining. In any case, it’s a hard industry to thrive in, but Restaurant Brands has found a way to triumph where many other rivals have stumbled.

Whether we’re talking about hyper-personalized loyalty apps that target value or the bold reinvention of classic menu items (of course, I speak of the Burger King Whopper refresh), Restaurant Brands’ managers have found a way to drive system-wide sales without sacrificing margins. Sure, any fast-food firm can tout a turnaround strategy, but Restaurant Brands has actually pulled it off.

As fast-food moves above and beyond the value menu to highly-satiating products that don’t break the bank, I think QSR is poised to keep putting up more wins. Add more operational automation into the equation, and maybe Restaurant Brands can grow margins and sales at a surprising rate in the next two to three years. Any way you look at it, the firm has the secret sauce, and its growing dividend makes it a fantastic way to stay ahead of price increases to come.

Fool contributor Joey Frenette has positions in Restaurant Brands International. The Motley Fool recommends Restaurant Brands International. The Motley Fool has a disclosure policy.

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