Buy This Dividend Stock to Beat a Canadian Recession

Let’s look at one new reason to buy and hold Restaurant Brands International Inc. (TSX:QSR)(NYSE:QSR) through a potential recession.

| More on:
You Should Know This

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn moresdf

Recession: the word is on every investor’s lips at the moment, whether they think it’s an eventuality or not. While pundits may be divided as to the efficacy of such indicators as inverted yield curves, unemployment rates, housing data, and loan delinquency to accurately signal a deep and widespread correction, the fact is that fear is stalking the markets and driving investors towards classically defensive assets.

Ten years have passed since the last recession — a particularly heinous one from which some sectors still have yet to recover fully. The next one could come from a familiar source: the United States. It’s a fact that the U.S.-China trade war has spooked the markets in a way that few modern international disputes have in few years. The Iran situation has the potential to bubble over into something altogether more disruptive.

Where do investors hide ahead of a downturn?

There are a few classically safe assets to hide when the markets undergo significant turbulence. Beyond safe-haven commodities such as gold, which carries with it its own degree of volatility, there are the usual suspects: apartment real estate investment trusts, electricity utilities, discount grocery outlets, and other consumer staples. While fast food isn’t always included in this list, there’s certainly an argument for its inclusion.

That’s why the news that Restaurant Brands (TSX:QSR)(NYSE:QSR), owner of Tim Hortons and Burger King, will be pushing its Popeyes brand deep into the Chinese market is so exciting. With an outlined 1,500 restaurants due to open in the Asian powerhouse during the course of the next decade, Popeyes is the latest in a string of Chinese market invasions by the Tim Hortons owner.

While the push is subject to regulatory overlook, the news has seen an improvement in the parent company’s share price, up a few percentage points in the last week. Paying a 2.68% dividend yield, it’s a stock worth adding to a long-term portfolio built around passive income.

Is a recession really that likely?

While investing in food has its own challenges, it’s certainly a safer play than oil, which could see significant price massaging in the event of a real-world conflict between our closest trading partner and any number of emerging economic powers. Indeed, if runaway oil prices began to impact the market, growth could slow and quickly precipitate a severe global correction in the markets.

Along with recession, another flash word doing the rounds right now is debt. Among the biggest worries at the moment for market observers is the increasing debt load shouldered by Canadian households, but also by Canadian businesses and even governments. Consumer confidence could be bolstered by fiscal stimulation, though the capacity to boost growth from the top down is limited.

The bottom line

When the going gets tough, the tough tighten their waistbands and cut down on their expenditures. This is where fast food comes in, and why stocks like Restaurant Brands offer a potentially lucrative play for investors eyeing the country’s macroeconomic data with some alarm. As an industry that could actually improve during a recession, the budget takeaway sector may be a rewarding target for cautious investors.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Victoria Hetherington has no position in any of the stocks mentioned. The Motley Fool owns shares of RESTAURANT BRANDS INTERNATIONAL INC and has the following options: short October 2019 $82 calls on RESTAURANT BRANDS INTERNATIONAL INC.

More on Dividend Stocks

growing plant shoots on stacked coins
Dividend Stocks

5 Dividend Stocks to Buy With Yields Upwards of 5%

These five companies all earn tonnes of cash flow, making them some of the best long-term dividend stocks you can…

Read more »

funds, money, nest egg
Dividend Stocks

TFSA Investors: 3 Stocks to Start Building an Influx of Passive Income

A TFSA is the ideal registered account for passive income, as it doesn't weigh down your tax bill, and any…

Read more »

A red umbrella stands higher than a crowd of black umbrellas.
Dividend Stocks

3 of the Safest Dividend Stocks in Canada

Royal Bank of Canada stock is one of the safest TSX dividend stocks to buy. So is CT REIT and…

Read more »

Growing plant shoots on coins
Dividend Stocks

1 of the Top Canadian Growth Stocks to Buy in February 2023

Many top Canadian growth stocks represent strong underlying businesses, healthy financials, and organic growth opportunities.

Read more »

stock research, analyze data
Dividend Stocks

Wherever the Market Goes, I’m Buying These 3 TSX Stocks

Here are three TSX stocks that could outperform irrespective of the market direction.

Read more »

woman data analyze
Dividend Stocks

1 Oversold Dividend Stock (Yielding 6.5%) to Buy This Month

Here's why SmartCentres REIT (TSX:SRU.UN) is one top dividend stock that long-term investors should consider in this current market.

Read more »

IMAGE OF A NOTEBOOK WITH TFSA WRITTEN ON IT
Dividend Stocks

Better TFSA Buy: Enbridge Stock or Bank of Nova Scotia

Enbridge and Bank of Nova Scotia offer high yields for TFSA investors seeking passive income. Is one stock now undervalued?

Read more »

Golden crown on a red velvet background
Dividend Stocks

2 Top Stocks Just Became Canadian Dividend Aristocrats

These two top Canadian Dividend Aristocrats stocks are reliable companies with impressive long-term growth potential.

Read more »