Restaurant Brands International – New Buy & Massive Raise

Restaurant Brands International – New Buy & Massive Raise

Since the day I have bought Restaurant Brands International the stock has been doing fantastic. If your Canadian I’m sure you know about Tim Horton’s. The fast food coffee and Bakery powerhouse. Every morning there is lines of cars and people dying to get their morning/ afternoon and even late night fix.

Restaurant Brands was Formed in 2014 when 3G capital bought Tim Horton’s and created a powerhouse with both Burger King and Tim Horton’s. In 2017 Restaurant Brands added Popeye’s chicken to their portfolio. As I have stated before I like Tim Horton’s a lot. I don’t go daily though, A coffee a day keeps the investment’s away! Burger king is my favorite fast food. Popeye’s is great for their diversification, but I don’t get excited about them.

How About That Dividend?

Being a relatively young company they aren’t a dividend growth star yet, but I seriously think they could be. Yesterday was their earning’s report and they absolutely destroyed analysts expectations! QSR earned 66 cents per share, beating analysts average estimate of 57 cents. Net income in the fourth quarter rose to $395 million, or $1.59 a share, up from $118.4 million, or 50 cents a share, a year earlier!

Before yesterday Restaurant Brands International has raised their dividend the past 11 quarters. Yesterday, well was a good day. They decided to raise their dividend by 114%. Yes you did read that right! An absolute monster raise. The biggest one we have received yet. I wanted to add more to them last week on the pullback but was turned off by their 1.4% yield. Now they sport a over 3% yield. They plan to pay out 45 cents usd quarterly starting in April.

I think this stock is going to take off, now that its dividend doubled. Currently the p/e ratio is higher than I would like sitting at 28.1 of fiscal 2017 earnings. According to this Motley fool article it’s 22 times the consensus analyst earning per share estimate of US$2.68 for fiscal 2018 though.

The potential of this stock is massive, in my opinion. We decided to add to our small position by buying an additional 13 shares mid day for around 74$ a share. Unfortunately this averages up my cost basis on this stock, but if Restaurant Brands keeps firing on all cylinders like they are its worth it. The stock is currently 15% below their 52 week high.

Negatives

Now there is some negative’s that come with this stock. In Ontario we just raised minimum wage and some owners cut benefits to staff to compensate. People complained on social media and it took off. There were people pledging to not go to Tim Horton’s for a day etc. Yeah I said one day, that’s how hooked people are.

Remember when people wanted more money to work at Mcdonalds? A lot of them got replaced by a atm that takes your order. I’m sure Restaurant Brands will be implementing these soon. They also just introduced a app to speed up the process and most likely reduce the employees.

Franchises

QSR also raised the prices on supplies for the franchisee’s. This was probably not a good move. While it boosts profits just like our employee’s moral is important, You don’t want all your franchisee’s being pissed off at you. I’m pretty sure Tim Horton’s owners are still laughing to the bank owning the stores though.

Same store sales percentages haven’t been overly exciting. The sales growth has been sideways with a little bit of growth. Mcdonald’s new value menu might be a little competition, but come on a little double cheeseburger ain’t gonna fill no one up. I still want a mac attack or whopper with cheese heavy all! (If you didn’t know bk offers heavy toppings for free)

If this value menu does well, I’m sure burger king will introduce cheaper options as well. The Jr Whopper would be so easy to make a value menu!

I really don’t know much about Popeye’s, its not a product I eat much. Ive had it a couple times but personally I prefer kfc. I’m sure their supplies increased as well but I haven’t heard anything about it.

There will always be sales competition that is nothing new. The current drama around Tim Horton’s isn’t good and I’m sure will pass. The minimum wage thing is probably just province specific, companies evolve and fix the problem.

Conclusion

We now own 33 shares total and will bring in $59.40 usd yearly in dividends. Restaurant Brands International has done a great job and with this massive dividend increase their yield is now higher than Mcdonald’s.

I like the stock they offer a tonne of growth with all these new stores opening up and clearly they like to be shareholder friendly. While Restaurant Brands International isn’t a dividend aristocrat yet, I believe in time they will be. Now that the yield is north of 3% I plan on continuing to add to our position. What are your thoughts? Do you own it?

Have a great Day

Cheers!

Rob

Hey I’m Rob, creator of Passive Canadian Income.

In 2011 me and my wife had almost $60,000 in debt and a negative $7,000 Net Worth. Through hard work and financial education we paid all that off. Now we are focusing on increasing our Passive Income Streams to make the money work for us. Feel Free to Follow along the Journey by clicking the Social Media links below or subscribing to get notified of new posts on the sidebar.