New investors tend to be drawn into markets by some of the more exciting, growthier momentum stocks. Indeed, for beginners, it’s the shot of large capital gains that convinces one to put aside a bit of extra cash in any given month to invest in their TFSA or any other account. And while younger market newcomers might have more tolerance for risks associated with such high-flyers, the big question is whether it still makes sense to own some steady Eddies with a limited sum.
Of course, those defensive dividend stocks with lower betas probably won’t be subject to those massive upside surprises that capture the attention and investment dollars of others. But, at the very least, you’ll be able to set things, forget about it and move on.
Sometimes, being boring is a good thing when it comes to picking your own stocks, especially at a time when most others might be more inclined to brag about their big gains in an AI-related name. In my view, the ability to think independently and not get lured into chasing something that you don’t understand is a form of superpower in the investment world. Another power is the ability to think really long term (think more than 10 years out).
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The case for starting with dividends
And while I still think that growth is a better fit for young investors looking to buy their first stock (it’s certainly good if the promise of growth gets Canadians excited about saving and investing), I’m also not against dipping a toe into the investing waters with some of the more stable dividend payers out there, if not to build one’s “market legs” with less anxiety-inducing names, perhaps to gain an understanding of how dividends, markets, and all the sort work without having to inspire a panic.
So, this begs the question: What kind of dividend payers are good for new investors? While steady dividend growers or “bond proxy” kinds of plays popular among retirees are fine, I think that some of the deep-value options with higher yields might be more interesting, especially given the higher risk/reward.
Remember that a dividend stock can have higher risk and reward as well, especially if we’re talking about a high-yielding stock that’s under some form of distress. In this piece, we’ll look at a name that I view as a deep-value play that may very well have what it takes to perform well while continuing to spoil investors with steady dividend payouts.
Restaurant Brands International
Restaurant Brands International (TSX: QSR) has to be one of my favourite growth, value, and income plays that’s fit for beginners. Why? It’s an easy-to-understand business behind chains that we all know and love. Think Tim Hortons, Burger King, Popeye’s Louisiana Kitchen, and Firehouse Subs. The company has performed relatively well when you consider the dire state of the industry amid inflation and consumer-facing pressures.
The stock hasn’t been immune to pressures, though, with shares falling 11% from its highs despite reporting numbers that weren’t nearly as bad as peers. As the value menu moves on, I view QSR as a share-taker and one that can keep growing earnings and the dividend (3.7% yield), even when the tides move against the industry for a while longer.
Of course, higher rates and challenged wallets don’t make for an ideal environment for the quick-serve restaurant space. But, in my view, QSR is a wonderful name to pick up while times are tough because they won’t stay that way forever. In the meantime, the firm’s investments have been paying plenty of dividends, and the proof really is in the pudding.
In short, QSR is a dividend stock, a growth play, and a dividend growth name, all in one. And it’s a name I’d strongly consider if I were to pick a first stock. As for how much to buy, it all depends on how much you’re starting with. Personally, I’d consider putting a quarter position to work gradually over time.
