Sandy McIntyrePizza Pizza RoyaltyPZA.TOHOLDJan 22, 2009

PZA is a $457.9M company that pays a 6.4% yield. Its performance has been quite resilient over the last few years, and it now trades at a 14.6X forward earnings multiple. PZA operates as a royalty company that collects stable royalty earnings from the franchisee and pays out almost all of its cash flow as distributions. Its balance sheet is decent, with net debt of $39.8M, strong profit margins, and recent sales growth of ~13%. Going forward its sales and earnings are expected to grow in the high-single digits this year, and then ~3% to 5% thereafter, along with inflation. Although growth is not that fast, it is stable, and predictable in earnings and distribution payments. Overall, we like this name for income purposes.
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This Canadian chain is everywhere and its brand is known by everyone. That is PZA‘s strength—an entrenched fast-food chain with locations to serve nearly every corner of this massive country. If an economic slowdown hits, PZA will endure as diners trade down and loyal customers will continue to snack here.
Some numbers work in PZA’s favour: trading at a beta of 1.04, a three-year return of 65.69%, and paying a dividend of nearly 6%. However, that comes at a payout ratio of 92%, while EPS growth shrank 5% YOY. Read Planes, pizza and clothes for our full analysis.

PZA’s performance has been quite resilient in the last three years, and is now trading at 15.0x times' Forward P/E.
PZA operates as a royalty company that collect stable royalty earnings from the franchisee and pays out almost all as dividends.
The balance sheet is strong, with net debt of $39M.
Total debt is around 1.3x times trailing twelve-month cash flow of $29M, and cash flow grew around by 16% compared to $24M last year.
Going forward, sales are expected to grow by 3% - 5% along with inflation.
Although growth is not really fast, the company has been stable, and predictable in earnings and dividend payments.
Overall, we think PZA is solid name for income purposes.
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A royalty company. Low risk dividend overall. He likes it. Income names have been beaten up. Overtime it will come back.

He doesn’t know if this franchise matches all the other options are out there. A royalty play.

Income royalty names have suffered from interest rate hike fears. He prefers other royalty companies. He'd like to see more Pizza Pizza stores and same store growth. Pays a 9% dividend. Prefers A&W who are growing their footprint in
Canada. People will always want pizza though.

his stock is one you definitely don’t want to buy yet. It is making lower highs and lows and you have to wait for a base to form. Don’t catch a falling knife. Yield 7%