Saturday, October 28, 2017

Recent Dividend Increase

    As individuals and investors we are always looking for a bargain.  If you like Pepsi and Coke and one of these is on sale at the grocery store when you go, you will grab the one on sale. But I am not talking about that type of bargain.
     We all live busier lives than a few years ago. We never had things to consider before like checking facebook or twitter feeds.  Due to the rise in the cost of living, both parents NEED to work to make ends meet.  The dual income households also usually means your personal health in way of great home cook meals suffer.  The food that is often prepared at home is usual just something thrown together quick to satisfy the hunger after a long day at work and the daily commute.  Sometimes they choose to go to a restaurant or a fast food restaurant.
      As we know most fast food is unhealthy. Some of the common fast food chains are Kentucky Fried Chicken, McDonald's, Burger King, Wendy's and Tim Horton's.  Tim Horton's use to be just a coffee and donut shop, but started to become a restaurant by offering sandwiches and the likes. At these restaurants there are some healthy things on the menu.  These healthy food items cost a little more. People have been more concerned about their diet in the past several years.  Some of these concerns are is the food free of hormones and genetically modified or non-genetically modified.
        In Canada, a fast food chain the is ahead of their peers is A&W.  Some of the things A&W has done in recent years is as follows:
  • Serve beef raised without the use of hormones or steroids.
  • Serve eggs from hens that are fed a vegetarian diet without the use of animal by-products
  • Serve chicken from chickens that are raised without the use of antibiotics and fed a vegetarian diet without animal by-products.
  • Serve pork that is raised without the use of antibiotics
   An investor can not buy ownership in A&W Foods, but receive a share of profits.  A&W has a royalty fund called the A&W Revenue Royalties Income Fund (ticker symbol:  AW.UN).  The income fund trades on the Toronto Stock Exchange.

The Fund is a limited purpose trust established to invest in A&W Trade Marks Inc. (Trade Marks), which indirectly owns the A&W trade-marks used in the A&W quick service restaurant business in Canada. The trade-marks comprise some of the best-known brand names in the Canadian food service industry. Trade Marks licences these trade-marks to A&W Food Services of Canada Inc. in exchange for a royalty of 3 per cent of the sales of 861 A&W restaurants in Canada.  
This structure makes the A&W Revenue Royalties Income Fund a "top-line" fund because income is based solely on the sales of A&W restaurants minus the Fund's and Trade Marks' minimal operating expenses, interest on Trade Marks' term debt and income taxes. The Fund is not subject to the variability of earnings or expenses associated with an operating business. (Source: A&W Income Fund

  A&W is feeling the effects of the sluggish economy in Alberta.  The oil and gas sector is the largest employer in Alberta and affects a lot of other businesses.  It is said that one operating rig creates 135 jobs directly and indirectly.  The indirect jobs are restaurant workers, hotel staff, convenience stores etc.  Over the coming years A&W plans to expand more in Ontario.
    The price of food at A&W is little more expensive than other fast food restaurants.  The food is better for you and you will less likely to get sick eating A&W over other fast food restaurants.

  A&W Income Fund recently released its 3rd quarter earnings. Some of the highlights are as follows:
  • Q3 same stores sales growth of 3.7%
  • Royalty income up 6.6%
  • 22 new restaurants opened year to date
  • Distributions increased by 2.3% (from $1.596 to $1.632 per year )
   The monthly distribution will be increased starting with the November distribution payment on November 30 for unit holders on record date of November 15. 

    I owed 38 units of AW.UN.  Therefore, my annual dividend income is increased by $1.37.  This is not a huge amount but it is better than nothing.

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.


  1. Looks solid as a buy. Nice yield and dividend payout ratio. Not to mention awesome growth in the last 5 years.

  2. IP -

    A&W is great, and hey - an increase is always nice to receive!! Congrats.


  3. Grats on the raise. I love me a teen burger and the chubby chicken is great