Ask any lady about the bare necessities of life, and chocolate ranks way on up there. Food, fire and shelter… and fudge brownies.
That could be one sexist statement unencumbered by cold hard facts, but sure, Valentine’s Day was just but a scant week ago. It’s not for nothing that flowers *and* a box of chocolates do much to generate goodwill among the genders. Not flowers and broccoli, not flowers and a toaster, but a dozen roses and some tasty truffles.
In keeping with this site’s model dividend portfolio, it’s all about investing in the basics: food, beer, smokes and now chocolates.
Rocky Mountain Chocolate Factory has been in operation since the early 1980′s, with delicious chocolatey offerings and a tasty dividend yield of 4.44%.
Rocky Mountain Chocolate Factory, Inc., incorporated in 1982, is an international franchiser, confectionery manufacturer and retail operator in the United States, Canada and the United Arab Emirates. The Company manufactures an extensive line of premium chocolate candies and other confectionery products. The Company’s revenues are derived from three principal sources: sales to franchisees and others of chocolates and other confectionery products manufactured by the Company; the collection of initial franchise fees and royalties from franchisees’ sales; and sales at Company-owned stores of chocolates and other confectionery products.
Now is that more than a little weird, United States, Canada *and* United Arab Emirates? Not really. I’ve seen this with other food franchises, like for example Round Table Pizza. A mostly West Coast pizza chain with a great Garlic Supreme, they’re all over the SF Bay area, a few here and there in neighboring states like Oregon and Nevada…. and in the airport terminal in Dubai. Go figure. It could be that some vacationing Emiratis liked the pizza (or chocolates) so much that they wanted to have some available back home too, and just bought the franchise.
So, as long as both portly Americans and chubby Gulf Arabs keep noshing on marble fudge and macadamia clusters, I’ll keep a small chunky chunk of our 401K invested in RMCF. This is what the portfolio looks like now, with the addition of 200 shares of RMCF.
One might say, why not go for chocolate royalty like Hershey Company (HSY)? Good question. Let’s see how the numbers stack up, comparing RCMF versus HSY versus another Centavos stalwart, GLDC.
Hershey certainly has scrumptious ROA and ROE numbers, with 14.48% and 70.87%, low beta, and a dividend yield of 2.50% growing at a healthy 6.56% clip over five years. No wonder that a good many fund managers find some room for HSY on their portfolio.
But, they also hold plenty of long-term debt, and their stock has been on a tear this year, rising towards its high of $66 last reached back in 2005.
Me, I tend to like nano-cap stocks like RMCF. Not as liquid, and certainly more risky, but more fun. RCMF’s five year chart looks a little more sedate, but with only 325 or so franchises, there is room for growth. Even if it doesn’t, that’s OK as long as it keeps up its dividend.
Speaking of dividends, RMCF’s payout ratio is on the high side at 67%, but for a franchise operation, they’re profitable and it appears that they can afford to return profits to shareholders and not worry overly much about plant and equipment, bricks and mortar — that risk is taken on by franchisors. Indeed, RMCF’s long-term debt load is exactly zero. I’ll keep watching. Should the dividend falter, I might just switch to HSY.
What do you think, readers? Nano-cap versus blue-chip large cap? Or both?
(by the way, the dividend portfolio looks a bit healthier than the last update in terms of total returns)