Boston Pizza Royaties Q2 results are out this morning. The results are at least moderately disappointing with same-store-franchise-eligible sales down 0.4% and this is despite some menu price increases and increased take-out orders. Traffic volume in the restaurants is not revealed but must be down. This is blamed primarily on the continued lower activity in Alberta and other energy-patch areas.
The distribution remains attractive at over 7%. However, the payout ratio in Q2 was 103% in Q2 which is a quarter that is normally expected to be under 100%. The release may be hinting at a possible modest distribution cut to keep the payout ratio at the target 100% level.
The bottom line is that without the hoped for increase in same-store franchise-eligible sales and with higher interest rates and despite the attractive yield, the unit price could certainly decline until and unless same-store franchise sales begin to grow again.
I have a fairly large position and I may reduce it somewhat.
I do note however that the Q2 report continues to suggest that the outlook is positive with plans for more advertising and other actions. My fear of a small distribution cut may be unfounded. A lot will depend on the Q3 results. As is usually the case, investing is a waiting game.