Investment Opportunities

Top 6 Restaurant and Fast-Food Stocks to Buy in 2021

As the country reopens, fast-food stocks should climb higher. More people are starting to travel and are looking for quick bites to eat along the way. Social gatherings are picking up, and this trend is helping traditional restaurants as well.

On top of that, the best food companies can pass along inflation to their customers. We’re seeing price increases in many places. So it’s important to protect your savings against the loss in purchasing power… whether that be the best agriculture stocks or the food stocks below.

The big companies in the industry tend to have some pricing power. Ultimately, people have to eat to survive and convenience is a big selling point.

To start out, let’s take a look at the top fast-food stocks and some company highlights. There are some unique reasons these companies made the cut. Moreover, you’ll find some more insight and other investing opportunities.

A fast food stocks owner tests out a burger

Top Fast-Food Stocks

  1. McDonald’s (NYSE: MCD)
  2. Starbucks (Nasdaq: SBUX)
  3. Chipotle Mexican Grill (NYSE: CMG)
  4. Restaurant Brands International (NYSE: QSR)
  5. Domino’s Pizza (NYSE: DPZ)
  6. Shake Shack (NYSE: SHAK)

McDonald’s Serves Up Huge Dividends

This fast-food chain is one of the most recognizable in the world. It operates in more than 118 countries and territories. With about 34,000 restaurants, McDonald’s serves more than 69 million people every day.

McDonald’s has a proven track record, and it continues to adapt. It’s adapted to different markets and changing consumer trends. This has allowed the company to push sales higher and reward shareholders…

McDonald’s has continued to pay investors higher dividends. And in the next few years, it might become a dividend king. To achieve that, a company has to increase its dividend for 50 consecutive years.

Starbucks Builds Loyal Customers

Starbucks is based out of Seattle, and it’s expanded rapidly. It has become the largest coffee chain in the world. As of March 28, 2021, Starbucks had more than 32,900 company-operated and licensed stores.

Even after a challenging year, that number is up 3% from the prior year. Starbucks has built a smooth drive-thru experience as well as online ordering. With the Starbucks app, you can easily order and earn points. The rewards program keeps customers coming back for more.

Although its main products are drinks, Starbucks is easily one of the top fast-food stocks. It also offers up a wide range of food options. The company continues to test new products and push profits higher.

Chipotle Survives and Thrives

Not long ago, Chipotle went through a string of food safety issues. At the time, its customer base cratered… but the company has overcome those issues. It’s now pushing into new frontiers.

Chipotle doesn’t have as wide of a reach as McDonald’s or Starbucks. It operates close to 2,800 restaurants throughout the United States. However, this gives more room to grow. The burrito chain is looking to fill 20,000 restaurant jobs. To attract employees, the company has also increased its minimum wage.

With this expansion also comes a big push into online ordering and delivery. The pandemic took its toll, and Chipotle is adapting. The company is investing more into delivery services. It also recently announced its first ghost kitchen. These are restaurants for pickup and delivery orders only.

Restaurant Brands International

This fast-food stock includes three major brands. It gives investors access to Burger King, Popeyes and Tim Hortons. In total, there are more than 25,000 restaurants, and Burger King is the largest with more than 17,800 locations.

With these three major brands, the company is able to experiment in different ways. As consumer trends change, each restaurant tries new foods. For example, Popeyes caught national headlines a few years ago. Its new chicken sandwich sold out, and customers were willing to wait hours at some locations.

Restaurant Brands International is a leader when it comes to fast food. For investors, it’s also good to note that it’s a Canadian company. In 2014, Burger King and Tim Hortons joined forces with a $12.5 billion merger. Tim Hortons is a leading Canadian coffee and restaurant chain.

Domino’s Pizza Is a True Fast-Food Stock

Pizza is a huge market in the U.S., and Domino’s has gained market share. Currently, some estimates put it close to 50% of the pizza delivery market. That outpaces competitors and allows for better economies of scale.

Domino’s has also benefited from the pandemic. As more people have been stuck at home, pizza deliveries have increased. As the world continues to reopen, some demand might drop. However, Domino’s is planning ahead.

One strategy Domino’s uses is fortressing, which began in 2012. It adds more stores to existing markets. This is an effort to cut down on delivery times as well as be closer to carryout customers. There is risk of some overcrowding, but it’s worked well so far and can improve customer experience.

Shake Shack Delivers Online Growth

Shake Shack is the smallest on this list of fast food stocks. Since the original New York Shake Shack opened in 2004, it’s opened only a few hundred restaurants. Although, it’s built a solid brand and has high growth potential.

As expected over the last year, Shake Shack has seen an increase in online orders. Its app and web sales increased about 230% year over year in first quarter 2021. These online channels have brought in roughly 2.4 million new buyers during the pandemic.

This recent growth is great, and Shake Shack still has some of the most room to expand. But with that comes higher risk. So always do your own due diligence before investing.

Food Stocks Recap and New Investing Menu

The restaurant industry is competitive with tight margins. Although, the fast food stocks above have already delivered solid growth. They’ve built some competitive advantages, and with loyal customers, they can pass along increasing costs. These stocks will likely reward shareholders for many years to come.

Another food stock on my radar is Krispy Kreme. The Krispy Kreme IPO is on the horizon, and you can click on that link to learn more.

Whether you’re looking for big growth opportunities or stable dividends, you’ll find them in Liberty Through Wealth. It’s a free e-letter that’s packed with investing tips and tricks. Whether you’re a beginner or already advanced, there’s something for everyone.


About

Brian Kehm double majored in finance and accounting at Iowa State University. After graduating, he went to work for a cryptocurrency company in Beijing. Upon returning to the U.S., he started working with financial publishers and also passed the CFA exams. When Brian isn’t researching and sharing ideas online, you can usually find him rock climbing or exploring the great outdoors.

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