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Dividend Stocks: Which Restaurant Stock Is the Best to Buy?

·4 min read
food restaurants
food restaurants

Written by Daniel Da Costa at The Motley Fool Canada

There are several high-quality restaurant stocks to buy in Canada, especially if you’re a dividend investor. And luckily for investors, not only are there several to choose from, but each offers its own unique advantages and disadvantages. So deciding on what restaurant stock is the best to buy will depend a lot on your preferences and what kind of dividend investor you are.

For example, there are restaurant stocks you can buy for recovery potential that have been impacted by the pandemic. In addition, there are restaurant stocks that offer attractive long-term growth.

Then, of course, there are some you can buy if you want a steady and stable dividend each month or quarter. So if you’re a dividend investor looking for a high-quality restaurant stock to buy today, here are three of the best to consider.

A top Canadian recovery stock

One of the best dividend stocks to buy now if you still want to look for recovery potential from the pandemic is Boston Pizza Royalties Income Fund (TSX:BPF.UN) and its 6.6% yield.

Boston Pizza has been incredibly resilient so far. It was understandably impacted when the pandemic began, and at one point, the distribution was even suspended. When it was reinstated in the fall of 2020, the fund was paying out roughly 40% less than prior to the pandemic. However, it has since been increased as Boston Pizza continues to recover.

And today, even with the Omicron surge, it has been a lot more resilient. That limits its upside potential in the price of Boston Pizza units somewhat but also shows what an excellent investment it can be.

And as we finally emerge from the pandemic and all restrictions are lifted, Boston Pizza could not only offer capital gains potential but that dividend could be increased once again too.

So if you’re looking for a high-quality dividend stock to buy now, Boston Pizza offers significant recovery potential over the coming quarters.

One of the best monthly dividend stocks to buy now

Another stock that’s been stable — in fact, even more reliable than Boston Pizza — is Pizza Pizza Royalty (TSX:PZA). Pizza Pizza is always a low-volatility stock that pays a monthly dividend, so it’s always one of the best to buy.

There are two main reasons why Pizza Pizza has seen some of the smallest impacts of all its peers. First, it doesn’t rely as much on in-person dining as Boston Pizza, or other dine-in restaurant chains do. In addition, it’s a lower-cost option with a strong brand, and because it has an incredible e-commerce platform as well as its own delivery service, it doesn’t have to rely on third-party delivery apps as much.

This allows the company’s sales to stay a lot more robust, which is why the dividend was only trimmed by about 30% to begin with during the initial pandemic and all the significant lockdowns.

So if you’re looking to buy a highly stable monthly dividend stock that currently offers an attractive yield of more than 6.1%, Pizza Pizza is one of the best to consider.

A top restaurant stock for long-term growth

Lastly, if you’re more of a dividend growth investor, one of the best stocks in the restaurant industry to buy now is A&W Revenue Royalties Income Fund (TSX:AW.UN).

For years A&W has grown its popularity among Canadian consumers, which is why it’s such an excellent investment to make today. Just like the other two restaurant stocks, it was impacted severely to start the pandemic.

But recently, A&W has been increasing its dividend and is now paying out almost all of what it was before the pandemic. So as workers return to the office and the economy continues to normalize, not only will A&W continue to see an uptick in sales and more of a recovery, but it will allow the stock to continue its long-term growth strategy, which has seen it become the second most popular burger chain in Canada.

Plus, in addition to the long-term growth potential it offers, the fund also pays a distribution that currently yields upwards of 4.3%. So if you’re a dividend investor that’s looking for more of a dividend growth stock, A&W is one of the best restaurant stocks to buy.

The post Dividend Stocks: Which Restaurant Stock Is the Best to Buy? appeared first on The Motley Fool Canada.

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Fool contributor Daniel Da Costa owns BOSTON PIZZA ROYALTIES INCOME FUND. The Motley Fool owns and recommends PIZZA PIZZA ROYALTY CORP. The Motley Fool recommends A&W REVENUE ROYALTIES INCOME FUND.