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Restaurant Brands' Dividend Keeps Heating Up

We expect the company's healthy top-line growth to maintain and grow its dividend payout.

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R.J. Hottovy: Restaurant Brands International, the parent company of Burger King, Tim Hortons, and Popeyes Louisiana Kitchen, has quietly become one of the more intriguing dividend stories in the restaurant space today. On its most recent quarterly update, the company effectively doubled its dividend payout ratio, now paying $1.80 annually, representing a 3% dividend yield. This puts the company in the upper echelon of dividend yields in the restaurants space today, even after Restaurant Brands and a number of its competitors have sold off company-owned locations of franchisees, taken on additional debt, and used those proceeds to return cash to shareholders. We expect the payout ratio to remain comfortably above 60% for the foreseeable future and grow at a high-single-digit clip.

Our confidence is backed by the company's unique master franchisee joint venture structure, where it assigns franchising rights in a given region to a well-established, well-capitalized player. With the company making some brand acquisitions the past couple of years, including Tim Hortons and Popeyes, we believe these master franchisee joint venture partners will have a lot of brands at their disposal to grow over the next several years, and in fact, expect the company to grow its top-line at a healthy mid-single-digit clip, thus giving us confidence in the company's ability to pay out a dividend.

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R.J. Hottovy does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.