Printed on April seventh, 2023 by Felix Martinez
Pizza Pizza Royalty Corp. (PZRIF) has two interesting funding traits:
#1: It’s a high-yield inventory primarily based on its 6.3% dividend yield.Associated: Checklist of 5%+ yielding shares.#2: It pays dividends month-to-month as an alternative of quarterly.Associated: Checklist of month-to-month dividend shares
You’ll be able to obtain our full Excel spreadsheet of all month-to-month dividend shares (together with metrics that matter, like dividend yield and payout ratio) by clicking on the hyperlink beneath:
The mixture of a excessive dividend yield and a month-to-month dividend render Pizza Pizza Royalty Corp. interesting to income-oriented traders. As well as, the corporate has a strong enterprise mannequin, with most of its revenues recurring. On this article, we’ll focus on the prospects of Pizza Pizza Royalty Corp.
Desk of Contents
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Enterprise Overview
Pizza Pizza Royalty Corp is a Canadian firm that operates within the restaurant business, primarily via its two manufacturers, Pizza Pizza and Pizza 73. Pizza Pizza Royalty Corp is a singular entity within the Canadian inventory market, because it operates as a royalty-based revenue belief construction.
Pizza Pizza, based in 1967, is a well known and established pizza chain in Canada, with a robust presence in Ontario, the place it originated. Pizza 73, based in 1985, is a pizza supply and takeout model specializing in Western Canada, notably Alberta and British Columbia.
As a royalty-based revenue belief, Pizza Pizza Royalty Corp doesn’t function the eating places straight, however as an alternative earns royalties from franchisees who function Pizza Pizza and Pizza 73 areas. The corporate’s income is primarily generated from royalty funds primarily based on a share of franchisee gross sales. This distinctive enterprise mannequin permits Pizza Pizza Royalty Corp to generate income with out straight bearing the prices and dangers related to working eating places, corresponding to labor, hire, and meals prices.
Supply: Investor Presentation
Pizza Pizza Royalty Corp’s income and profitability are straight tied to the efficiency of its franchisees. The corporate’s monetary success is dependent upon components corresponding to franchisee gross sales, the variety of eating places in operation, and total shopper demand for pizza and fast-food choices.
One of many notable options of Pizza Pizza Royalty Corp is its historical past of paying month-to-month dividends to its shareholders, which has made it a sexy funding for income-seeking traders. Nonetheless, it’s vital to notice that dividend funds usually are not assured and may be topic to vary primarily based on numerous components, together with the corporate’s monetary efficiency and administration choices.
Development Prospects
On March seventh, 2023, the corporate reported the fourth quarter and monetary yr outcomes for 2022. The corporate gross sales elevated by double-digits through the yr whereas it additionally opened a file 45 new eating places.
The corporate eating places managed via inflationary pressures from each commodity and labor will increase. The optimistic momentum all through 2022 allowed for 3 dividend will increase as walk-in and pickup gross sales elevated considerably as pandemic restrictions have been relaxed or eliminated.
The corporate is happy to announce one other dividend improve surpassing its pre-Covid dividend charge. The administration crew appears to be like to proceed the gross sales momentum by leveraging its advertising and marketing strengths whereas that includes its high-quality menu choices. The introduced dividend improve was 3.6% in comparison with the final dividend charge.
For the quarter, same-store gross sales elevated 13.0% year-over-year (YOY). On the similar time, adjusted earnings per share elevated 11.1% YOY.
By way of enlargement, Pizza Pizza Royalty Corp has centered on rising its restaurant footprint primarily via franchising. The corporate has a historical past of selectively opening new areas and dealing with current franchisees to renovate and improve current eating places to satisfy altering shopper calls for and market traits.
Nonetheless, it’s value noting that the restaurant business, like many different sectors, may be topic to challenges corresponding to altering shopper preferences, aggressive pressures, and financial fluctuations. Moreover, the franchise enterprise mannequin comes with dangers associated to the efficiency of particular person franchisees, potential authorized and regulatory modifications, and different operational challenges.
Supply: Investor Presentation
Dividend & Valuation Evaluation
Pizza Pizza Royalty Corp. provides an exceptionally excessive dividend yield of 6.3%, 4 occasions the 1.6% yield of the S&P 500. The inventory is thus an fascinating candidate for income-oriented traders. Nonetheless, U.S. traders must be conscious that their dividend is affected by the prevailing change charge between the Canadian greenback and the USD.
The corporate’s coverage is to distribute all out there money to maximise returns to shareholders over time after permitting for affordable reserves. Regardless of seasonal variants inherent to the restaurant business, the corporate’s coverage is to make equal dividend funds to shareholders month-to-month to clean out revenue to shareholders.
The corporate’s working capital reserve is $7.5 million, a rise of $0.5 million within the quarter because of the 93.8% payout ratio. With the rise within the month-to-month dividend in February, June, November of 2022, and March 2023, the corporate believes that there’s adequate money circulation to service the corporate’s obligations as they fall due whereas additionally growing the month-to-month dividend above its pre-COVID ranges.
The corporate has a really wholesome steadiness sheet. The corporate has an curiosity protection ratio of 27.1x, which is excellent, and a Debt/Fairness ratio of 0.2.
Relating to valuation, the corporate appears to be like to be barely overvalued as a result of the present PE of 15.5x earnings is barely larger than its ten years common PE of 14.6x. Primarily based on 2023 earnings expectations of $0.67 per share, the corporate’s honest worth worth is $9.73 per share. At present, the corporate is buying and selling arms for $10.20 per share.
The present dividend yield of 6.3% can be decrease than its five-year dividend yield common of seven.43%. Thus, primarily based on the PE ratio and dividend yield common, the corporate appears to be like to be barely overvalued on the present worth.
Supply: Investor Presentation
Closing Ideas
In conclusion, Pizza Pizza Royalty Corp is a singular firm within the Canadian restaurant business, working as a royalty-based revenue belief specializing in pizza manufacturers. Its enterprise mannequin depends on producing income from royalty funds from franchisees, and it has a historical past of paying growing month-to-month dividends to shareholders.
The corporate’s success is intently tied to the efficiency of its franchisees and total shopper demand for pizza and fast-food choices. As with every funding, conducting thorough analysis, reviewing monetary statements, and consulting with a certified monetary skilled is crucial earlier than making funding choices associated to Pizza Pizza Royalty Corp or some other firm.
In case you are fascinated about discovering extra high-quality dividend progress shares appropriate for long-term funding, the next Positive Dividend databases will likely be helpful:
The foremost home inventory market indices are one other stable useful resource for locating funding concepts. Positive Dividend compiles the next inventory market databases and updates them month-to-month:
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