Published Mon, 11 Feb 2019 16:10:58 -0500 on Seeking Alpha
If you want to make a lot of money in the stock market, you could do worse than invest in companies that sell addictive products.
Longtime readers know I’m a big fan of businesses that sell habit-forming goods, like soda, coffee, and burgers. People need these products to get their “fix.” And for shareholders, that demand often translates into robust returns.
Case in point: coffee giant Dunkin' Brands Group Inc. (Nasdaq: DNKN). The company amounts to a glorified caffeine pusher, offering customers their sweet productivity juice for a few bucks a shot. Without their favorite beverage, heavy drinkers literally go into a period of withdrawal.
This has created a lucrative income stream for shareholders. Since going public in 2011, management has boosted the distribution to investors every single year. And over that period, Dunkin’ Brands' stock has delivered a total return, including dividends, of 324%.
But can Dunkin’ keep those dividends rolling in? Most likely.
Aside from selling an addictive product, Dunkin’ owes much of its success to an asset-light business model.
Most food chains own all of their restaurants. That’s a problem because the industry suffers from notoriously low margins.
Dunkin’, in contrast, doesn’t own a single one of its establishments. Instead, they have an army of franchisees on every street corner pushing their product. Dunkin’ can sit back and collect a commission on each coffee or doughnut sold.
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