A&W Revenue Royalties Fund (TSX:AW.UN) has quietly become one of the TSX’s best performing stocks.
Including reinvested dividends, $10,000 invested into the stock five and 10 years ago, would be worth $23,587 and $57,816 today, respectively. That’s an 18.7% return over the last five years and 19.2% over the last decade.
A&W has been doing a lot of things right. It has made a big effort to invest in better ingredients. Its hamburgers use beef raised without the use of hormones or steroids. Its chicken comes from birds raised without the use of antibiotics, and its eggs come from hens fed a vegetarian diet.
It did all this without sacrificing taste; A&W’s burgers are consistently ranked as some of Canada’s best tasting.
The chain has also done a nice job creating a flexible format that can easily fit into smaller locations, allowing it to open restaurants in spots that are too small for a traditional fast food place. It has 838 locations, making it Canada’s second-largest burger chain, trailing only McDonald’s.
These changes have really helped goose the top line. Same-store sales increased 3.4% for 2016, with total royalty income increasing 7.3%. Same-store sales growth was a combined 11% for 2015 and 2016. The company blamed 2016’s weakness on tepid Alberta sales and a crowded fast food market.
A&W has hiked its dividend twice in 2016 for a total raise to shareholders of 5.5%. It also increased its payout by 3.5% in 2015. Shares currently pay $0.133 per month, good enough for a yield of 4%.
