Editor’s Note: Nathan’s pick today pays a 3.5% yield with a payout ratio of just 20% of free cash flow — the kind of dividend discipline that holds up in any economy. For more income stocks built on structural consumer demand, Robert Rapier’s Safety Rating System screens 200+ essential-service companies to find the ones you can actually count on. See which income stocks pass Robert’s safety screen →

In the words of legendary chef Auguste Gusteau, “anyone can cook.” (Yes, I’m quoting the Pixar film Ratatouille.) But sadly, many have no interest in the art. That’s a big reason why potluck dinners aren’t what they used to be. A pan of Aunt Betty’s decadent Mississippi Mud sheet cake is now a box of grocery store cookies.

Culinary talents aren’t genetically passed along in the gene pool. A New York Post survey found that while 80% of Gen Xers claim to be adept with a whisk and saucepan, the inverse is true for the Millennial and Gen Z groups. Just one-in-five are comfortable preparing a complex dish without using a microwave.

Skills aside, the decision to cook or dine out often comes down to time. Many on-the-go families simply don’t have the luxury of a formal sit-down affair on an average Tuesday. There might only be a matter of minutes before school or after soccer practice to feed the crew.

That’s another argument in favor of a fast-food drive thru lane… or maybe a food delivery service. Care to guess how much Americans spend annually on fast food? $100 billion? $200 billion? Try $400 billion – and close to $1 trillion globally.

While quality can vary, quick-service restaurants are generally viewed as a good value proposition (although sub-$10 combo meals are getting harder to find as labor and ingredient costs continue to spiral). Whatever the reason, nearly two-thirds of Americans eat fast food at least once per week for breakfast, lunch or dinner – if not all three.

The average household spends about 10% of its income eating away from home. Some of that goes to casual dining chains and higher-end establishments, but the bulk of the transactions involve burgers, chicken, tacos and sandwiches.

Sources vary, but per-capita spending figures range from $1,200 to $2,000 per year. So if those drive-thru lines seem a bit longer (even with mobile order pickup), it’s not just your imagination. Many popular locations see a never-ending stream of vehicles from open to close — even at non-peak hours.

Some say the industry is saturated. I don’t think so. I heard that same argument 15 years ago when McDonald’s (NYSE: MCD) first surpassed 30,000 stores. It was still being made in 2020 when the store count reached 40,000. Today, there are 45,000+ locations worldwide, and management is aiming for 50,000 by the end of 2027.

But this isn’t really about Mickey D’s.

McDonald’s may be the world’s largest and most recognizable dining chain (with a footprint in more than 100 countries worldwide), but its best growth days are in the past. Systemwide sales edged up just 1% last year – well below the heated 15% to 30% growth rate of up-and-coming chains such as Raising Cane’s, Shake Shack and Jersey Mike’s.

McDonald’s isn’t the most productive either. That honor goes to Chick-Fil-A, which rakes in about $7.5 million in annual sales per location, handily beating the $2.7 million for the average Golden Arches unit. Sadly, it’s a private enterprise.

MCD stockholders haven’t exactly been suffering. Still, there are more compelling options.

This is a fiercely competitive landscape with low barriers to entry. The U.S. is home to 220,000 fast-food joints hawking everything from gyros to sushi, so weaker players are always being culled from the herd. Still, the long-term uptrend isn’t likely to show any real reversal over the next few years.

In fact, the quick-service industry is widely expected to deliver healthy 5% to 7% revenue growth through 2030. And thanks to unwavering demand, this group is somewhat immune to economic shocks. It can even be counter-cyclical at times. After all, the worse things get, the more inclined people are to eat off the value menu.

Recessions may cripple the housing market. Or bring the banking clan to its knees. But they never dampen our collective appetite for a quick meal served in a brown paper sack.

Ever thought of opening a franchise? Unfortunately, most of us lack the time, expertise and/or startup capital. But there’s a solution.

An Appetite for Consolidation
A single share of MTY Food Group (OTC: MTYFF) provides a small stake in 7,000+ stores across North America. And the expanding portfolio of 90 brands resembles a veritable buffet.

MTY owns Tex-Mex chains such as La Salsa and Baja Fresh, Italian eateries like Giorgio, and sub shops like Blimpie’s. There are Asian names, bakeries, and a smorgasbord of classic American diners ranging from BBQ joints to steakhouses. Some of the faster-growing segments include coffee roasters, snack vendors and smoothie stands.

The largest chains in the portfolio are Wetzels Pretzels, Cold Stone Creamery, and Papa Murphy’s take-and-bake pizza.

Starting out with a single banner in 1979, MTY has aggressively closed more than 50 acquisitions since 1999. Growth was slow in the early years. It didn’t reach 1,000 units until 2008. But the store count doubled to 2,000 in 2012, doubled again to 4,000 in 2016, and is well on the way to doubling again… with a current count of 7,034.

Some of these stores are perennial mall food-court favorites. But they only comprise a small portion of the portfolio – most are street-front properties. Combined, they generated $5.6 billion Canadian dollars ($4.1 billion U.S.) in system-wide sales last year, a five-fold increase over the past decade.

To be clear, 97% of these units are owned by third-parties… who send steady franchise and royalty fees back to the parent. This asset-light model carries much less operational risk.

While macro headwinds have stalled top-line growth in 2026, the company continues to turn every dollar of revenue into nearly a quarter of EBITDA. First quarter earnings climbed 13% to $0.98 per share, while free cash flows strengthened to $1.27 per share. For context, this collection of businesses is currently valued at less than 5 times last year’s operating cash flows.

Like many of its peers, MTY is struggling with sluggish same-store sales right now. But the international segment remains a bright spot. And management sees a healthy pipeline of new location opportunities, fed by robust franchise demand for some of its larger brands.

In the meantime, it continues to feed stockholders a steady stream of cash. Since implementing regular quarterly dividend in 2010, MTY has raised distributions by more than 700%. There have been over a dozen hikes along the way, the latest a 12% uptick in February that lifted the dividend to $0.37 per share.

In U.S. dollars, that puts the annual payout at approximately $1.08 per share – lifting the yield to 3.5%. Incidentally, this distribution eats up just 20% of the firm’s FCF, a very comfortable margin consistent with sustainability and continued growth.

I should add that management also diligently paid down $102 million in debt last year to bolster the balance sheet. That might also make the company a more attractive takeover target (there has been chatter).

Investors have two options here. Most of the trading volume in MTY takes place on the Toronto Stock Exchange, which is accessible on many U.S. brokerage platforms. But the stock also trades over-the-counter on the “pink sheets” under the ticker MTYFF. One caveat: it’s thinly traded. While not a huge concern, be aware that entering and exiting large block trades might be tricky.

The dividend discipline Nathan describes above — 700% growth since 2010, with just 20% of free cash flow going to distributions — is exactly what serious income investors should be hunting for. Our colleague Robert Rapier applies the same standard to a universe of 200+ essential-service stocks in Utility Forecaster, using a proprietary Safety Rating System to separate reliable income compounders from the traps. His Income Portfolio carries a beta of 0.41 and currently yields 4.8%. See which stocks pass Robert’s safety screen →