Fast food is an appealing area of investment, as the industry broadly enjoys strong economics and steady cash flow from year to year, even during recessions. This allows the top fast-food companies to return lots of cash to shareholders through dividends. For these reasons, Restaurant Brands International (QSR) with its nearly 4% yield is an interesting candidate for income investors.

Its attractive dividend yield makes it a favorite stock among income investors, and even institutional investors such as legendary hedge fund Pershing Square Capital. QSR is one of Pershing Capital’s top holdings, representing approximately 16% of the fund’s holdings.

With a nearly 4% yield and long-term growth prospects, QSR is a solid holding for dividend growth investors.

Business Overview and Recent Earnings

Restaurant Brands International is one of the world’s largest owner-operators of quick-service restaurants (hence its stock ticker, QSR). The company was founded in 2014 by the $12.5 billion merger between American fast food restaurant chain Burger King and Canadian coffee shop and restaurant Tim Horton’s. Later, Restaurant Brands International expanded its franchise portfolio with the 2017 acquisition of American fast-food chain Popeye’s Louisiana Kitchen.

At the end of the most recent reporting period, Restaurant Brands International had the following restaurant counts at each of its three franchises: Tim Horton’s, 4,934; Burger King, 18,756; Popeye’s Louisiana Kitchen, 3,369. Restaurant Brands International is headquartered in Oakville, Ontario, Canada, and trades on the New York Stock Exchange with a market capitalization of $26 billion.

In early August, Restaurant Brands International reported (8/6/20) financial results for the second quarter of fiscal 2020. Due to the pandemic, Tim Horton’s and Burger King saw their system sales plunge -33.4% and -25.2%, respectively, but Popeye’s Louisiana Kitchen generated system-wide sales growth of 24.0%. The impressive performance of Popeye’s resulted from the great success of its chicken sandwich, which has proven to be a game-changer for the brand. Adjusted earnings-per-share slumped -54%, from $0.71 to $0.33.

On the bright side, at the end of the quarter, Restaurant Brands was back to 90% of its pre-COVID sales, with 93% of its restaurants open worldwide. The company is trying to maximize the potential of its stores via drive-thru, take-out, and delivery options but it will inevitably be hurt by the pandemic this year. However, the company should return to growth over the long-term.

Attractive Growth And Income

The company has ample room to keep opening new stores for several years. Management has announced plans to increase the total store count from the current level of 27,059to more than 40,000 over the next 8-10 years and intends to return to strong growth of restaurant count from next year. Moreover, the sustained strength of Popeye’s, thanks to its successful launch, bodes well for the growth potential of Restaurant Brands International. The company will incur a dip in its earnings this year but we expect it to recover from next year, along with the global economy.

In the meantime, the stock rewards investors with a high dividend yield which currently yields 3.7%. This is a very attractive yield, given the broader S&P 500 Index yields less than 2% right now. In a low-interest-rate environment, QSR stock offers growth as well as income. This makes QSR a highly attractive stock for income investors looking for a mix of current yield and future growth potential.