Peter Lynch, the world’s top mutual fund manager from the 1970s through the early 1990s, maintains that it’s a good idea to invest in companies you’re familiar with, companies you see in action regularly. That stock market advice could certainly be put to the test by the many Canadians who pour through the doors of the country’s best known coffee and fast food chain every day.
TIM HORTONS INC. (Toronto symbol THI; www.timhortons.com) operates 3,295 coffee-and-donut stores in Canada and 714 in the U.S. It also has five recently-opened outlets in the Persian Gulf.
The company’s new menu items, such as espresso-based coffee drinks, continue to be extremely popular. Warmer-than-usual winter weather has also spurred customer traffic.
These two factors pushed up Tim Hortons’ sales by 12.5% in 2011, to $2.9 billion from $2.5 billion in 2010. If you exclude the positive impact of foreign currency rates, sales rose 7.4% in 2011. Same-store sales rose 6.3% at its U.S. outlets, and 4.0% in Canada.
However, earnings fell 38.7% in 2011, to $382.8 million from $624.0 million. That’s mainly because the 2010 earnings included a $361.1-million gain on the sale of its 50% stake in a baking joint venture. The company used the proceeds to buy back $572.5 million of its shares. Because of fewer shares outstanding, earnings per share fell only 34.4%, to $2.35 from $3.58.
When Gennum rose 119% in one day on news of a takeover bid, it joined many other stocks recommended by Pat McKeough that have been taken over at a rich premium. To uncover values like these, Pat tracks three different portfolios for readers of The Successful Investor—one for Conservative Growth, one for Aggressive Growth and one for Income-Seeking Investors. And subscribers get free updates and advice on the stocks they’re following every week in the weekly E-mail/Telephone Hotline.
If you want a portfolio of Canadian stocks that is poised to give you both sustained growth and spectacular returns, you really should have a subscription to The Successful Investor. And as a new investor, you can save $50.00 on a no-risk introductory subscription. Click here to take advantage of this special offer now.
Stock market advice: Tim Hortons continues dividend increases and share buybacks
Tim Hortons also raised its quarterly dividend by 23.5%, to $0.21 a share from $0.17. The new annual rate of $0.84 yields 1.6%. The company plans to buy back a further $200 million of its shares over the next year.
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Do you invest in stocks that have products or services you use regularly? Has this approach paid off, or have there been occasions when you discovered there were flaws in the stock that weren’t obvious at first? Click here
The stock is up 25% in the past year, and trades at 19.3 times its forecast 2012 earnings of $2.74 a share. That’s a reasonable p/e ratio in light of the company’s iconic brand and high market share.
In the latest edition of The Successful Investor, we look at the risks associated with the company’s ambitious expansion plans. We also assess the outcome of a class-action lawsuit by the franchisees, who claimed the company overcharged them for baked goods. We conclude with our clear buy-sell-hold advice on the stock.
Twice I have sold stocks after checking out Their DISMAL stoeres (since bankrupt) I was appalled and then trying to open an account with Superior Propane(they were subsequently hammered). Good service at Canadian Tire prompted me to buy their stock.
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Twice I have sold stocks after checking out Their DISMAL stoeres (since bankrupt) I was appalled and then trying to open an account with Superior Propane(they were subsequently hammered). Good service at Canadian Tire prompted me to buy their stock.