News of a dividend increase is always a positive signal for investors. On Friday, Canadian restaurant franchisor MTY Food Group (TSX:MTY) reported its third-quarter earnings for fiscal 2026 and announced a massive 35% dividend hike. The company's new quarterly dividend will be $0.50, up from the previous $0.37. At a share price of around $31, this pushes the yield to a substantial 6.4%.
The move is particularly surprising given MTY's recent history. The stock has lost more than half of its value over the past five years and is down approximately 18% in 2026. Furthermore, MTY recently concluded a strategic review which even considered a sale of the business, but ultimately that didn't end up happening. Management is now pivoting toward cost-cutting, asset-light franchising operations, and portfolio optimization to become leaner.
Despite these restructuring efforts, MTY's financials offer reassurance regarding the payout. While same-store sales declined by 1.9% and net income dropped 11% to $24.8 million year over year in the most recent quarter, the dividend remains well-supported. Earnings per share for the period came in at $1.08. With the new $0.50 payout, the payout ratio is an entirely manageable 46%.
The stock currently trades at a low forward price-to-earnings multiple of 7.5. However, investors must ask whether this is a bargain buy or a dangerous value trap. MTY faces significant macroeconomic headwinds, with inflation stretching consumer budgets and hurting restaurant traffic. While the high yield acts as a tempting incentive to buy the stock, it's still a risky buy overall.
