The food industry has branched off into two distinct niches during the spread of the novel coronavirus. You’ve got dine-in restaurants, which have been struggling terribly. On the other hand, you’ve got food-delivery services which have thrived, and that has been reflected in pizza stocks.
While the coronavirus outbreak was unexpected, the surge in pizza deliveries can easily be accounted for. Lockdowns, shelter-in-place mandates and social distancing have made dine-in restaurants unappealing or unavailable. And not everyone wants to cook every day, so pizza delivery is an obvious food option.
There are three major, publicly tradable pizza stocks. Here’s what’s on the menu:
Like pizza toppings, you can try one of these stocks or you can try them all. Are you getting hungry for more info yet? Three slices, coming up!
Pizza Stocks to Buy: Domino’s Pizza (DPZ)
This is probably the most obvious choice among pizza stocks. However, DPZ stock isn’t exactly cheap, as it’s threatening to pierce the $400 resistance level. Also note that Domino’s might leave income investors with an empty stomach as the 0.81% forward annual dividend yield isn’t exactly a generous portion.
If you can look past the price tag and the stingy yield, you may find DPZ stock to be the ideal growth investment. Sales remain robust for Domino’s throughout its U.S.-based locations, having increased by 16% in April and May.
Moreover, as Domino’s CEO Ritch Allison observed, the company “is in a very strong financial position … both at the brand and franchisee level.” This quarter, Domino’s has generated $78 million in free cash flow. Plus, the company’s operating margin has improved year over year to 39% of sales.
So, if you’re looking for the most famous name in pizza delivery, it won’t be the cheapest, but DPZ stock might just be worth paying a little extra for.
Papa John’s (PZZA)
Almost as famous as Domino’s is pizza-delivery rival Papa John’s. And you’ve got to admit that the PZZA stock ticker is ingenious. Plus, it offers a slightly more favorable forward annual dividend yield of 1.13%.
You might say that Papa John’s is the poster boy of pizza delivery business success during the pandemic. From March 30 to April 26, which is less than a month, the company’s same-store sales increased by 27%. By the end of May, that number was up to 33.5%.
Clearly, Papa John’s President and CEO Rob Lynch had much to celebrate at May’s end. At that time, he reported, “for the second straight month, Papa John’s team members and franchisees delivered the best sales period in the company’s history.”
Maybe it’s the slightly sweeter, tangier sauce Papa John’s uses. Or maybe it’s the company’s aggressive push to deliver more pizzas to more homes during the Covid-19 pandemic. Either way, PZZA stock is running hot and won’t likely slow down anytime soon.
Yum! Brands (YUM)
Admittedly, Yum! Brands isn’t a pure play in the pizza niche. Sure, the company owns the Pizza Hut brand, but it also owns KFC and Taco Bell. So, be aware that you’d be diversifying beyond the pizza space with YUM stock.
That being said, diversification isn’t necessarily a bad thing. Besides, the forward annual dividend yield of 2.08% is better than that of the other pizza stocks on this list. In addition, a 12-month trailing price-to-earnings ratio of 25.61 suggests that YUM stock is competitively valued among its peers.
Prospective investors should also take note that Pizza Hut recently initiated a “massive shift in brand messaging” globally in response to the pandemic. Going forward, expect more emphasis on contactless delivery as well as food safety along with efforts to give back to the community.
That’s all a net positive for Yum! Brands and, by extension, for YUM stockholders seeking to invest in the new and very different pizza-delivery market.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets. As of this writing, he did not hold a position in any of the aforementioned securities.