Saturday, December 10, 2011

Investors in Coffee Machine Scam got Roasted - Stick with Coffee Stocks

The Federal government was recently involved in the prosecution of a company that was perpetrating a scam relating to the ownership of coffee vending machines which would be located in high-class areas. Some victims lost close to $200,000 each. Several investors never even received their coffee vending machines. The head of the swindle was sentenced to 10 years in jail plus $1.1 million in restitution.

Fortunately, there is an easier, safer, and better way to invest in coffee. The better option is through investing in stocks of companies involved in the coffee business. According to, there are half a dozen coffee companies with price to earnings ratios below 25, and even more coffee companies that pay dividends.

First, you can be a wholesaler of coffee through the ownership of stock in Coffee Holding Co. (JVA), a roaster of wholesale coffee that markets wholesale green coffee, private label coffee, and branded coffee in the United States and Canada. The stock trades at 16 times current earnings, 10 times forward earnings and provides a dividend yield that can outperform your money market yield, at 1.3%. Revenues rose 88% for the latest reported quarter, but earnings dropped 60%.

Why buy a coffee shop franchise when you can much more easily buy a part of the largest coffeehouse retailer in the world? Starbucks (SBUX) has outlets in 50 countries and over 17,000 shops worldwide. The stock trades at 27 times earnings and enjoys a yield of 1.6%. Earnings for the latest quarter were up an incredible 28.5% on an 6.8% boost in revenues.

For a list of all of the coffee stocks, including the ones 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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