Tuesday, July 22, 2014

Tim Hortons - Minor Company Review


    Tim Hortons opened it first restaurant in 1964.  The site of the first Tim Horton's was in an old gas station as shown in the image below. It served coffee and donuts. The store is named after it founder, Tim Horton. Tim Horton played NHL hockey for the Toronto Maple Leafs. During the 1960s, NHL players were not making a lot of money relative to other jobs like nowadays. Tim Horton started a coffee and donut shop to make extra money.

Tim hortons 50 years ago
Cortesy of Tim Horton's Online Annual Report - The first Restaurant

      In 2014, Tim Hortons celebrated it 50 year in business, which all started in the first restaurant above in Hamilton, Ontario. Tim Horton died in a car crash in 1974, but he partnered with a guy named Ron Joyce  early on in the business in 1967. Ron Joyce continued to building the company one restaurant at a time.

Some important mile stones for Tim Hortons.
  • In 1984, the first US restaurant opened in Tonawanda, New York.
  • 1991, 500th Canadian restaurant opened in Aylmer, Quebec.
  • 1995- Tim Horton's is purchased by Wendy's International Inc.
  • 2000 - 2000th restaurant opens in Toronto, Ontario.
  • 2006 Tim Hortons is completely spun off from Wendy's International and completes an IPO 
  
Some stats on the company as per Yahoo Finance Key Statistics as of July 22, 2014.
                                                          
Market Cap (intraday)8.06B
Enterprise Value (2014-07-23)9.28B
Trailing P/E (ttm ; intraday)20.50
Forward P/E (FYE 2015-12-29)16.59
PEG Ratio (5 yr expected)1.92
Price/Sales (ttm)2.43
Price/Book (mrq)15.67

       Tim Horton's current pays a dividend of $1.28 CDN annually. At today's share price, this represents a yield of near 2%. Over the last couple of years, Tim Hortons has been under pressure from activist shareholders who want investors to be rewarded with larger dividends. Th. e most recent dividend raise was 23%. Tim Hortons revamps its menu from time to time to compete with their main competitors. The main competitors are McDonald's and Starbucks. Currently, 8 out of every 10 cups of coffee is sold at Tim Hortons.

Conclusion: I believe this company will continue to do well over time. When you go to a Tim Horton's restaurant or through the drive thru, there are usually large lines of people or a lot of people sitting in their restaurants. These long line ups represent and ever increasing revenue stream day after day. The dividend is likely to increase, which will mean my money will be working harder for me year after year.

I currently own this in my margin account.
Disclosure: Long THI


DISCLAIMER
I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk
  

4 comments:

  1. Nice background on the company. I like the increasing shareholder friendliness the dividends have had great increases and THI still has a low payout ratio for more growth. As long as they don't lose market share to McDonalds or Starbucks seems like a cash cow. I'm long MCD but will be interesting if to see how much they raise the dividend this year.

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    Replies
    1. DSF,

      Thanks for dropping by. I believe Tim Horton's has to change more of their restaurants like putting in more comfortable chairs and fire places. In most of their small restaurants they have only the hard chairs and lack space for the type of chairs you would have in your living room.

      I think MacDonald's should do well. I never heard of anyone saying they disliked their coffee. As long as they have healthy food on their menu, I think they will be a good company to own for years to come.

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    2. Well man I woke up today and seen the deal with Burger King. Congrats up 17% plus as I am writing :D

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    3. DSF,

      I was shocked at this today when I found out. It was just like a week and a half ago it was like $60.00 a share. On BNN, which is Business News Network in Canada, one of hosts said that Burger King is undervaluing Tim Horton's and believe it should be $10.00 higher.. Wendy's bought Tim Horton's before and then spun it off.

      There are still stores which stand alone that have Tim Horton's and Wendy's attached to each other. From what I am reading if this goes through Burger King will be able to become a Canadian company and pay less corporate taxes than being in the US.

      I was contemplating buying more shares days before the price jumped to over 65 dollars.. It is still great that the share price jumped that much.

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