Jan 242013
 

In the US alone the entire coffee industry is valued at $20 billion a year.  In the quick service business, companies like Starbucks and Tim Hortons have such loyal customers that people are willing to sacrifice a part of their busy morning lives and wait in long lineups to get their cup of joe. In the past I couldn’t help but notice how many people I see everyday walking around with Starbucks coffee cups in their hands, and I thought hey if I were Starbucks, I could have just made some money from these folks. Well it’s time I stopped missing out. It is time to take action! So earlier today I bought 20 shares each of Tim Hortons and Starbucks 😀

2013_buy_sbux_thi

Starbucks for example had $13.3 billion in sales last year, from which they made $1.4 billion in profit. Out of that profit, they paid about $535 million to shareholders as dividends.

In other words, for every $4.00 cup of coffee they sell, it costs them about $3.60 to make, so they end up keeping about 40 cents as pure, after-tax profit. Makes good sense so far right? Out of this 40 cents, about 15 cents is paid to their shareholders (like myself) in cold hard cash (goes straight into my trading account) and the remaining 25 cents of the profit is used to further invest in the business such as establishing new locations, for example.

Starbucks has about 743 million shares in total, and I now have 20. Which means I own about 0.0000027% of the entire company :0) That means every time I see someone buying a cup of coffee (let’s say for $4) I know that they just gave me 0.0000004 cents in passive income (dividends,) or if I still remember how to do my scientific notations (4×10^-7) I know that doesn’t sound like much and I can’t really buy anything with 0.0000004 cents but think about all the billions of cups of coffee Starbucks serves around the world every year 😀 It all adds up! Anyone who buys just 1 stock of Starbucks today can expect to receive at least $.72 in dividends this year. Not to mention, Starbucks has a history of increasing dividends :0)

Starbucks dividend distribution history:

  • 2012 – $0.72 per share
  • 2011 – $0.63 per share
  • 2010 – $0.57 per share
  • 2009 – $0.51 per share
  • 2008 – $0.41 per share
  • 2007 – $0.38 per share

As you can see even during the great recession this company still managed to grow their business and give increasingly more dividends back to their owners. Starbucks is currently working on plans to open up another 3,000 stores in the Americas in the next 5 years, not to mention their other plans for the Asian markets. This tells me that their dividends are safe and their business outlook is strong, otherwise why would a company choose to expand if they don’t think they can get more sales? Think about how big Starbucks will become in 2020. That’s why I’m getting into the business now and holding it for the long term.

With three big names in the coffee service business all working for me I now collect altogether $155 a year in dividends from them 😀

if coffee is your daily grind you have 3 to choose from

To all those fabulous people who are regular customers of these fine franchises. Thank you so much for your business and for mocha me very happy (^-^)Your continuous support will bring me one step closer to financial freedom.

Disclaimer: I have 40 shares of MCD, 20 shares of THI and 20 shares of SBUX 🙂 Long all the stocks.

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Random Useless Fact: Despite living in Canada and even hosting the 2010 Winter Olympics, Vancouverites are notoriously bad for driving in the snow for some reason.coffee can give you the energy to drive to work

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32 Comments on "Investing in the Daily Grind"

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mochiandmacarons
Guest

Starbucks also bought Teavana, which is something non-coffee drinkers like me would gravitate towards. In addition, Teavana would be a bigger hit in parts of Asia than coffee, as tea is more of their thing.

I’m looking into Tim Hortons and McD right now and running their numbers.

Also, er.. are you happy with TD for buying stocks?

Because I’m with Questrade, and I don’t know the fees for TD, but it MAY be higher than Questrade, depending on how much you tend to buy and trade and how much you have with them as assets (I believe you get preferred flat rates if you have over $50K or something with TD).

They charge $4.95 at a minimum, then 1 cent per stock past that $4.95 minimum up to a max of $9.95 per trade.

Anyway, look into them to see if they could be cheaper for you.

I’m switching out my non-registered $$ from TD for my e-series to buy ETFs via Questrade because it’ll save me about $300/year or more.

If you do decide to go with Questrade, you can get $50 in free trades with this referral code of mine:

O0SOEHDS

Email me if you want more info.:)

plantingourpennies
Guest

Oddly, I thought of this before I saw the comment above, but it seems to be a theme…

You seem to do a lot of small trades, which makes me wonder – what are you trading costs?

myownadvisor (@myownadvisor)
Guest

Good call on the coffee stocks. People are addicted to this stuff. These stocks are almost like buying Philip Morris! 🙂

Mark

A.N Rajah
Guest

I know you have long position but great timing on Starbucks!!

John S @ Frugal Rules
Guest

Looks like you have some solid picks there. I am currently long a SBUX call, so we’ll see how that turns out. I know they bought Teavana, but I’ll be interested to see how they continue to diversify their offerings here in the future.

Theo
Guest
Theo

are you not better off to buy SBUX in your RRSP? I always buy US stocks and fixed income in my RRSP.

Vicky
Guest

Nice; I definitely contribute to your dividends! Especially when McDonalds has those darn coupons. 😛

I have been thinking about my trading costs recently as well, but have decided to stick with my RBC account with the $9.95 trading fees. I have considered Questrade, but I don’t think I trade enough to warrant the switch over, although they do DRIP Vanguard ETFs while RBC doesn’t!

Have a good weekend!

The Dividend Engineer
Guest

Great post! I like your calculations of the portion of each coffee you receive as dividend. The number may be small but if you multiply it by billions, it’s no so small anymore!

andyn
Guest

Great blog. First time comment. Where are you getting the Starbuck’s distribution information? Think you’ve got it wrong. 4 dividends last fiscal year, $.17 * 3 + $.21 *1 = $0.72. Think you might have interpreted their annual dividend as a quarterly one.

I always goto Edgar directly.
http://www.sec.gov/Archives/edgar/data/829224/000082922412000007/sbux-9302012x10k.htm
Page 19 of their 10k.

DebtGirl
Guest

Awesome! Good luck on your new investment. I think coffee is a good choice because its the fuel of the gods! 😉

John@MoneyPrinciple
Guest

Starbucks is getting bad press in the UK at the moment, being accused of tax avoidance. But that just means that they are employing better lawyers or the law here is stupid. Coffee is a big growth industry, which is a full circle return to the 18th century before the tea invasion! Good buy!

RetireInNiagara
Guest

Hate the coffee, like the stock !!! 20 shares eh, Awesome !!! I got 1.8 shares lol I have some catching up to do to you. Starbucks definitely a candidate for my RRSP this year, I put some Coke in last year.

Hopefully next month Timmies should announce about a 20% dividend increase !!!

makinthebacon$
Guest

I purchased 50 stocks of Starbucks a few years back. I ended up selling them to help with a down payment for the house. I definitely want to buy their stock again once I have more cash. If you are interested about reading about how it all started, the CEO, Howard Schultz wrote two books: Pour your heart into it and Onward. Christine Day, the current CEO of Lululemon used to work for Starbucks. I feel like they have similar approaches in running their businesses, especially commuinity invovlement. I buy actual Strabucks coffee once a month. :p

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