Early retirement is something many investors dream about. Whether your vision of early retirement is playing golf on a weekday, reading a long novel at the beach, or traveling to new places, it's a worthy goal to aspire to. It's also one that likely requires some help from the right stocks.
While we often associate retirement with dividend stocks, it's worth considering stocks that offer a mix of dividends and the potential for capital appreciation to help you arrive at retirement while generating passive income for when you get there.
It's also not ideal to look for moonshots when nearing retirement. Investors at this stage should be a bit more risk-averse than investors just starting out, as they have a bigger nest egg to protect. Furthermore, cyclical stocks may not be the most suitable for investors targeting early retirement. You don't want the stock you've been relying on to be in a down cycle when you're ready to retire.
With this approach in mind, one stock that looks ideal for helping investors work toward early retirement is Restaurant Brands International (QSR +0.78%).
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What is Restaurant Brands International?
Restaurant Brands International is the parent company behind Burger King, Tim Hortons, Popeyes Louisiana Kitchen, and Firehouse Subs. It franchises many of these restaurants out, and generates income from franchise fees, recurring revenue payments, sales at company restaurants, and lease payments from franchisees where Restaurant Brands owns the real estate. Its portfolio includes more than 29,000 locations in 100 different countries.
For investors seeking early retirement, this company has a diverse group of brands, multiple ways of bringing in income, and plenty of geographic diversification, which all help mitigate risk for it and its investors. Furthermore, while this incarnation of the company debuted in the public markets in 2014 after the Burger King/Tim Hortons merger, brands like Burger King and Tim Hortons have been around since 1953 and 1964, respectively, so it's not going away anytime soon.
Locking in a growing dividend
Restaurant Brands is a great dividend stock that can pay early retirees substantial income. Shares yield a market-beating 3.3%, and the company has slowly but steadily increased its dividend payment over the last few years.
Perhaps more importantly for investors eyeing early retirement, the company aims to grow the dividend significantly going forward. Restaurant Brands has talked about its commitment to growing its dividend to $1 per share over time (up from $0.54 per quarter now), so aspiring retirees buying today could be rewarded with much larger dividends several years from now.
NYSE: QSR
Key Data Points
Reclaim the flame
In addition to being a fairly stable and non-cyclical business and a solid dividend stock, a stock for early retirees should also offer the potential for capital appreciation to help get you over the finish line. Restaurant Brands has ample reason to believe that business can continue growing significantly in the future.
Burger King is the largest company in Restaurant Brands' portfolio, and it's working to revamp the Burger King brand with its Reclaim the Flame initiative. CEO Jose Cil said that the goal of Reclaim the Flame is to "engage our Burger King fans and create new ones" and to accelerate traffic, sales growth, and franchisee profitability in the U.S.
The company is investing $400 million in this plan to remodel aging restaurants, beef up advertising, unveil new menu items, and improve overall restaurant experiences. If the initiative is successful, it could give a big boost to Restaurant Brands' top and bottom lines in a few years.
Going global
Popeyes and Firehouse Subs are the two smaller brands within Restaurant Brands' portfolio, but they could also be compelling growth drivers going forward as they grow domestically and internationally. There are currently about 3,500 Popeyes worldwide and only 400 Firehouse Subs locations, so Restaurant Brands has plenty of runway to ramp up store count growth for these concepts. Since 2017 (when it acquired Popeyes), Restaurant Brands has opened 650 net new units in the U.S. and 400 new units internationally.
Popeyes will open a record number of new locations in 2022. It has entered new markets like Brazil, India, and Spain, and it's getting ready to enter lucrative markets like Indonesia and South Korea. This type of overall growth and international growth is great for investors, as it offers the potential for significant gains for years to come.
While Burger King and Tim Hortons are much larger than Popeyes, they also have plenty of room for international expansion. Tim Hortons recently entered the India market and opened its 50th location in Mexico, while Burger King reported strong same-store sales growth internationally.
A new sheriff in town
Lastly, the hire of former Domino's Pizza (DPZ +1.94%) CEO Patrick Doyle as Restaurant Brands' new executive chairman looks like a home run for the company and its investors. Doyle led Domino's through an incredible period of growth during his time in charge, when the stock gained 2,200%.
Even more exciting for Restaurant Brands shareholders is the fact that Doyle isn't taking a salary for this role. Instead, he'll be rewarded handsomely with performance share units if the stock price increases to at least $81.32 within five years, and further awards if the share price hits $122 (nearly double today's share price). It's great to see this type of alignment between Doyle and Restaurant Brands' shareholders, and it further highlights the stock's potential upside.
Riding off into the sunset early
Retiring early is a big goal, but picking the right stocks can help you get there and enjoy your retirement once you arrive there. Thanks to Restaurant Brands' stable and steady business, its attractive and growing dividend payout, and its potential for significant growth in the years to come, I believe it is an ideal stock for early retirees to add to their portfolios to help them work toward their goal.
