Saturday, July 30, 2011

Coffee at Six Month Low: Coffee Stocks Profit Margins Up?

According to a recent article at, the price of coffee has tanked to a six month low, primarily due to a glut from good weather conditions in Brazil, exports from Latin America increasing, and greater production in India and Japan. Since it is unlikely that baristas will start passing on cost savings to their customers, profit margins for coffee vendors should increase.

There are more than ten publicly traded companies in the coffee business, based on the list of coffee stocks at Half a dozen pay dividends with yields in excess of 1.2%.

Starbucks (SBUX) is the largest coffeehouse retailer in the world, with outlets in 50 countries and over 17,000 shops worldwide. The stock trades at 22.3 times forward earnings and pays a yield of 1.3%. Earnings for the latest quarter were up 20.4% on an 9.9% increase in revenues.

Another example is Coffee Holding Co. (JVA), a roaster of wholesale coffee which markets wholesale green coffee, private label coffee, and branded coffee in the United States and Canada. The stock trades at 23.5 times forward earnings and has a small dividend yield of 0.6%. Earnings for the latest reported quarter were up 48% on an 87% increase in revenues.

The J. M. Smucker Co. (SJM) sells the Folgers brand of coffee and has a forward price to earnings ratio of 14 and a generous yield of 2.4%.

For a list of all of the coffee stocks, including more than half a dozen that pay dividends, go to The list can be downloaded, sorted, and updated.

Disclosure: Author didn't own any of the above at the time the article was written.


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