I don’t like movie theater investing. About 85% of that $11 ticket you buy goes to the content creator for the movie you’re about to watch, and only 15% makes its way to the owners of the theater itself. The entire basis for owning stock in movie theaters is because you are compelled by the concession stand sales. Given that moviegoers encounter ballpark pricing with $4 candy bars and $5 soft drinks at the movies, I don’t see much room to raise concession stand prices without encountering an offsetting steep drop in demand.
This means that growth needs to come from increased foot traffic. I don’t see that happening either, as the proliferation of large in-home TVs and the rise of Netflix have dampened consumers’ appetites for the enjoyment of the theater experience. You can see this in the numbers, as movie foot traffic declined by about 2.5% annually from … Read the rest of this article!
A reason why I cover businesses that have upped their dividend payouts annually for years and years is because it touches upon the nerve of permanent wealth creation–timeless demand for the core product. When I point out that Colgate-Palmolive has raised its dividend every quarter since the day on which President Kennedy, C.S. Lewis, and Aldous Huxley simultaneously died, I am not only sharing the insight that it is attainable to own something that sends you more and more cash each year.
I am also pointing out that the growing dividend payout ratio is telling you something about the products being sold. Toothpaste in general, and Colgate toothpaste in particular, is so enmeshed in the human experience that Colgate’s Board of Directors have been able to part with about a third of profits every year while not only maintaining its competitive position but improving upon it. An impressive dividend growth … Read the rest of this article!
While the valuations of a lot of S&P 500 businesses have run up in the aftermath of the election, the stalwart healthcare firm Johnson & Johnson (JNJ) has continued to trade within a zone of reasonableness at a price of $115 per share. It is by no means “on sale” at this price, but it does offer an opportunity to own one of the highest quality businesses in the world at a fair price.
The reason I get so excited about my coverage of Johnson & Johnson stock, compared to another business that also has blue-chip investment status such as Campbell Soup, is that it is more than just “earnings quality.” Yes, the $12.9 billion profits held up during the 2008-2009 recession, and yes, the dividend is well supported by current earnings and has a history of increasing every year.
But Johnson & Johnson has the likelihood of high future … Read the rest of this article!
If you bought a share of Campbell Soup (CPB) back in 2000, your share would have earned $1.65 in profit and you would have collected $0.90 in dividends. Today, Campbell Soup earns $3.05 in profit and pays out $1.40 per share in cash dividends. This means that over the past sixteen years, earnings have grown by 3.9% annually and dividends have gone up by 2.8% each year.
This is not a business that serves the role of inflation hedge or stable dividend cash generator in a portfolio. It serves in the realm of wealth preservation rather than wealth building. There is value in that–each share paid you $0.88 in 2008 dividends, $1.00 in 2009 dividends, and $1.08 in 2010 dividends. It is a sign of intelligent estate planning to own business interests that not only maintain but grow their cash payout during periods of economic distress.
However, when you contemplate … Read the rest of this article!
In the past three years, global soda consumption is down 12%. And yet, soda-related profits at The Coca-Cola Company (KO) are up 2% overall during this time period. Why have soda profits held steady while people are drinking less and less of it?
The answer is smaller servings. Traditional 12-ounce soda cans that you can get at most grocery stores sell at an average price of 31.5 cents. Meanwhile, the new 7.5-ounce cans that Coca-Cola is aggressively promoting sells at an average price of 40.8 cents. Coca-Cola, which earns 28% net profit margins on its flagship offerings, earns 36.4% net profit on its 7.5-ounce cans.
If it sells $1,000 worth of traditional sized soda cans, about $280 accrues to shareholders. When it sells $1,000 worth of the smaller cans, shareholders get $364 that can be used for buybacks, dividends, and product investment.
These smaller soda cans are only about 5% … Read the rest of this article!