Tim Hortons Inc. (THI) operates, develops and franchises quick service restaurants in Canada (3148) and the US (602). The company has grown profits at a 10% annual rate since 2005 with dividends per share increasing from $.12 to $.84. In the same time frame it has generated a 25%+ return on equity. Above average growth should continue as a result of:
(1) Geographic expansion,
(2) Increased marketing effort to raise the size of the average customer check size,
(3) New product introductions.
Negatives:
(1) It is a highly competitive industry. Its major competitor is Starbucks.
(2) Rising commodity prices,
(3) The potential impact of continued economic malaise on sales.
THI is rated B++ by Value Line, has a 19% debt to equity ratio and its stock yields 1.3%.
Statistical Summary
| Stock Yield | Dividend Growth Rate | Payout Ratio | # Increases Since 2005 | |
| THI | 1.3% | 14% | 31% | 6 |
| IND* | 1.2 | 9** | 22 | NA |
| Debt/Equity | ROE | EPS Down Since 2005 | Net Margin | Value Line Rating | |
| THI | 19% | 27% | 1 | 14% | B++ |
| IND* | 63 | 29 | NA | 11 | NA |
*IND is the average of the Restaurant Industry as compiled by Value Line
**most companies in THI industry do not pay a dividend
Chart
Note: THI stock made great progress off its November 2008 low, quickly surpassing the down trend off its December 2007 high (straight red line) and the September 2008 trading high (green line). Long term, the stock is in an up trend (blue lines). The wiggly red line is the 50 day moving average. We recently started covering THI. It has been Added to the Aggressive Growth Universe and the Aggressive Growth Buy List. The lower boundary of its Sell Half Range is $70.
(Click to enlarge)
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in THI over the next 72 hours.
