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Most investors have been right to focus almost exclusively on growth stocks during this extended bull market cycle. In fact, many of the top high-growth technology companies have outperformed the market's more boring defensive stocks.
But one company I've continued to hammer onIn recent years, it has performed as well or better than many of the top Canadian growth stocks. Restaurant brands (TSX:QSR). The company continues to deliver consistent and sustained cash flow growth, which it passes on to investors via a dividend that the company appears well positioned to continue to grow over time.
For those looking for a great way to weather the uncertainty of the market right now, here's why Restaurant Brands is a company investors might want to consider.
Strong defensive business model
For those looking for a company with a truly defensive business model, a fast-food operator like Restaurant Brands is an excellent choice. With world-class brands like Burger King, Popeyes, Tim Hortons, and Firehouse Subs under its umbrella, Restaurant Brands has a clear long-term global growth profile that many investors are looking for.
This business model, which receives its revenue from franchises and royalties as well as operating income from company-owned restaurants, certainly favors investors. As consumers opt for less expensive options when dining out, I expect Restaurant Brands can see market share growth in down economic cycles. Consequently, for those looking to profit from what may be an impending recession or slowdown, this is a great way to play this business.
Strong long-term growth prospects
Restaurant Brands aims to increase the number of stores from 31,070 in 2023 to 40,000 in 2028, with an annual addition of approximately 1,800 restaurants. The company also plans to renovate 600 of its new Carrols restaurants and accelerate the expansion of Firehouse Subs in the United States and Canada.
Popeyes' primary focus is on expanding its operating hours and making operational improvements. The company aims to increase Popeyes' restaurant footprint in the United States and Canada from 3,400 to 4,200 locations by 2028, while improving its operational efficiency.
Based on information provided in the company’s press release, Restaurant Brands International anticipates that these collective strategies will result in an 8% annual increase in systemwide sales. Additionally, the company expects an estimated 3% growth in comparable sales and a 5% expansion in net restaurant count.
The verdict
Restaurant Brands International stands out as a top TSX stock due to its defensive appeal. It protects investments during market downturns and the potential for higher returns over the investment horizon. Additionally, the company's projected growth in the coming years can potentially lead to a doubling of returns within the investment period.