December 10, 2018

SCU Second Cup Ltd

 

 

At first glance there appears to be few companies that possess a better business model than coffee houses.  Running water over coffee beans you buy by the ton in order to produce a final product that must have a ridiculously high profit margin.  Then you pair that up with other novelty products such as high-priced baking and seasonal offerings, and you have a very profitable enterprise indeed.  While Starbucks is likely the brand name that you most associate with the coffee house industry, its brethren Second Cup (SCU) is another profitable dividend-payer.  The newly formed corporation came about as a restructuring of the company’s income trust model on January 1st, 2011.

 

Second Cup began in 1975 as a kiosk in a shopping mall, and it only sold coffee beans, as opposed to the full-fledged brewing locations we see today.  The company is now that largest franchisor of speciality coffees in Canada with 350 cafes in all.  Interestingly, 95% of Second cup Locations are franchisee-owned.  The franchise model is particularly attractive as owners of each location have a strong inventive to pursue new and innovative ideas in order to gain a competitive advantage over other coffee houses in their respective areas.

 

Second Cup (SCU) is proud of the fact that it buys only fair trade coffee.  The company is fully committed to the Rainforest Alliance Certification, Fair Trade, and Organic causes.  Siting corporate responsibility in its treatment of their employees and partners around the globe, Second Cup sells over one hundred thousand high-quality beverages every week.

 

Second Cup’s (SCU) annual results for 2011 were recently released.  While not spectacular, the company’s sales remained solid.  The President and CEO of Second Cup, Stacey Mowbray announced, “Given the continued intense competition in our category, the growth in same café sales of 1.2% in the fourth quarter and 1.8% system sales growth for the year was a satisfactory result. I am pleased with the opening of 22 new cafés during the year, giving us net growth of 10 cafés to the system. Earlier this year I announced that 80% of our Second Cup coffees and 100% of our espresso beverages have been Rainforest Alliance certified. We are proud of our continued leadership and commitment to sustainability through third party certifications. With our recent innovation in our tea offerings, I am proud to report that all of our teas and tisanes have also received Rainforest Alliance certification. This commitment to quality and sustainability in our beverage products coupled with the commitment and passion of our franchise partners supports Second Cup’s unique position in the market as The Coffee Company that Cares.”  While Ms. Mowbray may attempt to put a positive spin on the situation, revenues were down slightly overall on a year-over-year basis.

 

Second Cup (SCU) recently saw its stock open at $7.38.  This is close to the 52-week high of $7.99 and definitely a premium relative to the 52-week low of $5.44.  The company also has a relatively small market cap of around $74 million.  This makes me slightly nervous even though the company’s annual dividend of $0.60 gives it a tempting dividend yield of 8.2%.  I prefer larger industries, and companies with a more natural competitive advantage for my dividend portfolio.

 

 

 SCU Second Cup Ltd Dividend Stock Graph:

TSE SCU

SCU Second Cup Ltd Trend Analysis:

SCU TrendSCU is sending contradicting signal, better check the complete technical analysis to learn more about it.

SCU Second Cup Ltd Dividend Metrics:

TickerNamePriceDividend YieldPayout RatioINDUSTRY_SUBGROUPDEBT_TO_MKT_CAPDividend Growth 5 yearsDividend Growth 1 years
SCUSecond Cup Ltd/The7.458.0582.21Retail-Restaurants0.1743175-3.428212-8.69636
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