Earlier this week, we got a look at how Tim Horton’s (TSE:QSR), the popular Canadian donut chain, was looking to branch out into other day parts by offering up a line of flatbread pizzas. While some might have questioned whether Canadians would trust a donut shop with pizza, others embraced the concept avidly. However, investors were a bit more skeptical and sent shares up fractionally in Friday morning’s trading.
The good news here was that Tim’s wasn’t going anywhere that customers probably wouldn’t be willing to follow. After all, reports note pizza is the sixth most-ordered food in Canada. So there’s clearly a market. The problem with that, however, is that Tims’ is hardly alone in this market and is walking into a hotly-contested field.
In fact, McDonald’s (NYSE:MCD) famously tried to add the McPizza to its lineup, but no one was interested. Some might blame the time—McDonald’s tried this in the late 1980s, after all—and it certainly didn’t help that the McPizza took a long time to cook. So, while it’s been tried before and failed, Tim Horton’s might be able to learn a few critical lessons and succeed where others have failed.
Early Reports Are Encouraging
Early word has emerged on just what the customers think of the new dish, and the early reports are encouraging. While McDonald’s McPizza averaged about 11 minutes from start to finish, Tim’s can have a pizza ready in about 65 seconds. In addition, Tim’s dedication to picking just the right ingredients for the flatbread bases and toppings has turned out well.
Convenience was also a cited factor; people are there for breakfast, so why not for lunch? Some are indeed skeptical about a donut shop doing pizza—one noted that “it’s a bit weird”—but that was always going to be a factor. Still, as long as those people aren’t sufficiently weirded out that they pass on donuts altogether, the end result should still be a net win.
Is QSR a Good Stock to Buy?
Turning to Wall Street, analysts have a Moderate Buy consensus rating on QSR stock based on 15 Buys, six Holds, and one Sell assigned in the past three months, as indicated by the graphic below. After an 8.61% rally in its share price over the past year, the average QSR price target of C$115.40 per share implies 17.39% upside potential.
QSR also pays out a quarterly dividend, which yields 2.75%. This is above the Consumer Cyclical (XLY) average of 0.99%.
Is QSR the Right Stock to Buy for Passive Income?
Before you hurry to invest in QSR, think about the following:
TipRanks’ team has built a Smart Dividend Stock Portfolio for investors, and QSR is not included. Our portfolio highlights companies that have been hand-picked for their potential to deliver significant passive income for years to come.
