TSX:SRV.UN - Post by User
Comment by
logicandinertiaon Mar 21, 2018 7:23am
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Post# 27751546
RE:RE:Q4 results strong and portend to an encouraging 2018
RE:RE:Q4 results strong and portend to an encouraging 2018the minimum wage increase on Jan 1st has bumped up salary costs for servers, and also meant that managers got a salary bump. The response from many restaurants has been menu price increases.
Note that owners of SIR RTY get 6 percent of revenue , so the cost increases are not felt by the unit holder. How it would impact unit holders is if menu price increases drive decreased traffic, which would then impact revenue. SIR’s smaller size and more targeted locations are more immune than other more saturated brands. Note that KEG and SIR are comping about +5 %, but Boston Pizza is negative as is Pizza Pizza. And the dividend yields are lower.
The risk to royalty trusts is a back up in interest rates, which drives up yields by lowering share prices. With SIR at 8 percent yield and growing at 5 percent, less of an issue than Boston Pizza at 6.5 percent and shrinking (and already franchised and saturated).
It used to be that non resource royalty trusts were a no-brainer as interest rates fell. One has to be more careful now and ensure that the trusts they own are (a) well managed, (b) are still growing and (c) has a relatively high yield that insulates the backing up of rates.
SIR and a select few others seem to meet this criteria.