Jonathan Heller sees the return of the restaurant

The restaurant business is showing signs of a comeback, but higher labor and food costs could significantly reduce yields.



a cup of coffee: Jonathan Heller sees the return of the restaurant


© The Street
Jonathan Heller sees the return of the restaurant

This is the point of view of Jonathan Heller of TheStreet, writing in Real Money. “We had another sign of a potential return to normalcy in the restaurant business on Thursday when McDonald’s took some steps to return more capital to shareholders,” Heller said. “First, McDonald’s increased its quarterly dividend by 7% to $ 1.38 per share, which equates to a return of 2.25%. Second, the company has relaunched the $ 15 billion share buyback program it suspended in 2020. ”

McDonald’s has also maintained its status as a dividend champion and increased the dividend at a compound annual growth rate of 7% over the past 10 years.

Loading...

Loading error

Heller also likes the restaurant industry as a whole, which is back after 18 months of pandemic shutdowns. “The sector has continued to perform well since the start of the year, with a basket of more than 40 restaurant names with market capitalizations over $ 100 million, an average increase of 39.5% versus 19.7% for the S&P 500, 15.2% for the Russell 2000 index and 24.5% for the Russell Microcap index, ”he says.

Heller also lists its inventory of current “Big Five” restaurants – a self-created group that includes McDonald’s (up 16% year-to-date), Chipotle Mexican Grill (up 40%), Yum Brands ( up 16.5%), Domino’s Pizza (up 29%) and Darden restaurants (up 36%) – are now up 27.5% on average since the start of the year.

The worst player in the industry right now is newcomer BurgerFi International (BFI) (down 34% year-to-date), which went public last December after it was acquired by the company of Special Purpose Acquisition Opes Acquisition, ”he said. “BurgerFi is known for using Grade A Angus beef in its burgers; it has 118 locations (22 company-owned and 96 franchisees) in 22 states by my count. I have to admit I’m hungry as I write this, and I believe there’s a BFI location handy, so I’ll give it a try. I’ll let the dust settle on the stock, however, at this point. “

Heller’s concern for the industry remains rising labor and feed costs. “There is still pent-up demand among consumers to eat out of the home, but I don’t know what the appetite will be if menu prices continue to rise,” he added.

Get more trading strategies and information about real money contributor investing.

This article was originally published by The street.

Continue reading

Source link

About Robert Moody

Check Also

Avoid boarding a cruise ship regardless of vaccination status, CDC says

The United States Centers for Disease Control and Prevention has just indicated that people should …

Leave a Reply

Your email address will not be published. Required fields are marked *