A&W Revenue Royalties Income Fund (TSE:AW.UN), the small cap Canadian legacy stock, continues to return big over the long run. It is hard to find someone who is not familiar with this brand. As the 4th-largest quick service restaurant in Canada, it is also one of the most recognizable food and beverage companies in North America. Over the past few years, the franchise empire recently introduced a grass-fed beef burger to go along with its already wildly popular veggie burger. The company has listened to the trends and modified its offerings.
This is not the stock that will make you 3X in a year. At 551.92 million market cap, the company gives a dividend 4.3% yield and offer a proven low risk model for long term growth. (See A&W Revenue Royalties stock chart on TipRanks)
Adding to this stability is the Royalties Income Fund, which pays out cash. As the company stated in a press release, “The Fund declared a cash distribution of $0.135 cents per trust unit for the period May 1 to May 31, 2021. The distribution will be paid to unitholders of record at the close of business June 15, 2021 and will be payable on June 30, 2021. This distribution will be taxed as a non-eligible dividend, as the source of funds to pay the distribution is a dividend from A&W Trade Marks Inc. source.”
Expectations Remain High for Investors
According to A&W’s quarterly earnings report, “Same Store Sales Growth has trended upwards each quarter since Q2 2020 when the impact of the COVID-19 pandemic was at its peak.” The company ended the 1st quarter down to finish -5.6%, due to COVID-19 restrictions. Investors expect the stock to continue its gradual, steady recovery without delay.
The company’s business model has proven successful in keeping up with consumption trends like veganism, introducing the Beyond Meat burger recently, to the delight of millions.
The company has also kept up with social trends including the environment, stating, “We’re committed to reducing our environmental impact, through conscious use of packaging, waste, energy, and water. We’re all about serving up great taste with minimal.” The company is also adamant about reducing its carbon footprint.
After a huge drop at the peak of the COVID-19 economic crisis, the stock continues to climb back, up 9.27% over the past six months. Another key component of the stock’s appeal to investors is its dividend payout. On April 16, 2021, A&W announced it will pay a dividend of $66.3 million to its shareholders, giving both new and old shareholders added value and security in an uncertain economy.
Analysts’ Views
According to TipRanks’ investors, A&W has Very Positive sentiment, reaching a 52-week high at C$37.86 and a low at C$23.24.
The return on equity trailing 12 months is 10.64%, and asset growth is 6.87%. Capital gains year-to-date is 29.93%.
The stock closed on June 25 at C$37.84. Meanwhile, analysts predict it will reach C$38.86 within the next three months.
Bottom Line
Founded in 1919, A&W is one of the oldest and most successful companies in Canada. As it continues to attract new business with aggressive marketing and product development, it will likely continue to benefit investors with dividend payouts.
With 565 freestanding restaurants in Canada, along with 155+ convenience locations and 85+ urban locations, A&W remains vibrant.
With royalty income up +0.7% in Q1 2021 and down -9.1% in 2020, investors foresee a continued pathway to increased stability and growth. Given its growing payout ratio year-over-year, A&W remains one of the stocks investors continue to add to their portfolios for the long term.
Disclosure: At the time of publication, Lukas Brenowitz did not have a position in any of the securities mentioned in this article.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
