A year ago, going out to eat at a restaurant was an activity met with serious concern. With so many question marks about the pandemic and widespread efforts to maintain social distance, many of these businesses were put through the wringer and saw sharp declines in sales.
This led investors to take a cautious approach to restaurant stocks given the uncertainty about what the industry would look like in the future.
Fast forward one year and today, restaurant stocks are looking much more attractive. One promising sign includes the recent report from The Department of Labor which stated that bars and restaurants hired 286,000 employees in February.
It’s also worth considering that more people are getting vaccinated every day and many Americans have received stimulus checks, which could both be catalysts that help the restaurant industry bounce back soon.
If you are interested in adding some investment exposure to the restaurant industry, keep reading on for a list of 3 appetizing restaurant stocks to buy now.
1. Yum! Brands
First on our list is Yum! Brands (NYSE:YUM), a restaurant stock that could deliver tasty gains going forward. The company operates one of the largest quick-service restaurant systems that includes well-known names such as KFC, Taco Bell, and Pizza Hut.
While the company’s sales have been disrupted by the impacts of the pandemic, Yum! Brands has adapted to the circumstances well by implementing things like mobile ordering and third-party delivery partners. The company reported record digital sales in 2020 totaling $17 billion, which represents a 45% year-over-year increase. It seems that the pivot towards digital sales channels is already paying off, which is something investors can expect to continue long after the pandemic.
With over 50,000 restaurants in over 150 countries and territories, this is a company that offers investors exposure to several emerging markets that should drive growth over the long term. The stock also offers a dividend yield of 1.84% at this time and has a 3-year dividend growth rate (CAGR) of over 14%, which makes it a great option for those investors looking for extra income.
Yum! Brands stock has been trading sideways for months but just rallied to hit new 52-week highs, making it an attractive candidate for investors who are looking for recovery stocks that aren’t overextended.
2. Chipotle Mexican Grill
While you might have to pay up for shares of this fast-casual Mexican restaurant chain, the Chipotle Mexican Grill's (NYSE:CMG) growth prospects and strong brand might make it worth the price. Chipotle serves things like tacos, burritos, salads, and burrito bowls made with fresh ingredients in its 2,760 locations spread throughout the United States. What sets this company apart in the fast-casual restaurant segment is the fact that Chipotle offers high-quality food including naturally raised meats that come from animals that aren’t given antibiotics or hormones.
Chipotle Mexican Grill is one of the most successful restaurant stocks in recent memory, as the stock has rallied over 1000% over the last 5 years. What’s even more impressive is that the company reported a year-over-year revenue increase of 7.1% to $6 billion in 2020. While other restaurant companies were struggling during the pandemic, Chipotle was growing, which speaks volumes about the company’s brand and management team.
This was largely due to the company’s pivot to digital sales, which grew 174.1% and accounted for 46.2% of 2020 sales. Expanded sales channels including delivery platforms and mobile ordering can drive growth for Chipotle for years to come, and the company continues to steadily add new locations including an additional 161 restaurants in 2020.
3. Domino’s Pizza
If you haven’t noticed the recurring theme of our list of appetizing stocks, all of the companies featured here offer robust delivery services. That includes Domino’s Pizza, the leader in the pizza delivery business.
The truth is that consumer habits have likely changed forever when it comes to dining out. While in-person dining volumes will return at some point, a company like Domino’s that has been aggressively investing in its e-commerce platform and taking advantage of how popular online ordering has gotten is poised to deliver strong results for long-term shareholders.
This stock was one of the big winners of the pandemic but has fallen 16.6% from its highs over the past few months. The selloff could potentially be a strong buying opportunity, especially given the company’s market-leading position and consistent earnings growth. For FY 2020, Domino’s reported global retail sales growth of 10.4% along with Diluted EPS of $12.39, up 29.6% year-over-year.
This is one of the more appetizing restaurant stocks to buy right now, and even when the pandemic has been eradicated, it’s safe to say that people won’t stop ordering pizza anytime soon.