youngandthrifty’s 2011 TFSA Holdings- Part IV

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This is the last of the four part series in which I disclose in a sneaky and mysterious manner what I'm holding in my Tax Free Trading Portfolio for 2011.  In the first part of the series, I talked about Exchange Income Corporation (the aviation/manufacturing company), the second part I mentioned Just Energy, and last week, I talked about Sun Life. This week, the last stock I bought for my 2011 portfolio is very different from the above manufacturing/ utility/ and financial industries.

I had thought about owning this stock for a bit of time, ever since I did a post on it recently.  However, I was again hesitant due to the nature of the sector and the state of the economy.  How can a company that is considered a “non-essential” part of life possibly do well?

My mind changed, however, when I paid a visit last year (whereby the economy was still wobbly and the markets were schizophrenic).  The place was absolutely packed and people were having a good time.  Money was being spent like you would not believe (not too much by me, of course… it was just an observation on my part by looking around the room).  I thought…recession, what recession?

Stock market funding Pictures, Images and Photos

This company did not incorporate and instead stayed on as an income trust (and I am glad I'm holding it in my TFSA of course, otherwise I would be taxed to the nines).  Because of the taxation on the company thanks to the new Specified Investment Flow-Through Trust Tax “The SIFT Tax”, the distributions have decreased from $0.11 a month per share (about 9.9% annual yield) to $0.08 a month per share (about 7.2% annual yield at recent price point).  This is the only holding in my portfolio that has actually stayed on as an income trust.  All the other ones converted to dividend paying corporations.

Recent Year end Results have been good and better than expected.  Their financial information looks solid too.

  • P/E of 10.79
  • Price to Book Ratio of 1.29
  • Huge Gross Margins of 93 when the sector average is a measly 8.76  (I guess they get their product from Alberta on the cheap!)
  • It is near the 52 week high though (hmm what isn't? 🙁  )
  • Annual yield from distributions of 7.2% paid monthly
  • The main company office is based right here in Vancouver (well, actually Richmond, but same thing, right?)
  • First started in North Vancouver in 1971 and now has over 100 locations all across North America
  • Their commercials are very alluring and seem to stimulate your senses
  • Since 2003, holds the title of One of Canada's Top 50 Employers compiled by Aon Hewitt every year.

Alright enough beating around the bush… did you guess it?  I was very vague about it because it's very easy to guess.

One major hint- I talked about it in the Cheap and Good Eats Section (it's a Good Eat, and not a Cheap Eat).

If you guessed The Keg- You're the winner!  I might treat you out to the Keg if you guessed it right (sorry, got your hopes up!).

Next time I go to the Keg, I'll feel better ordering that glass of wine and a steak, knowing that I own a small portion of that company and am getting paid monthly for good earnings and profit.  It's a seemingly win win situation, I tell you.  And you know I'm a fan of those.

I don't think I would hold on to it for long term though, nor do I think I will be adding to my current position to KEG.UN.TO.  I'll wait and see how it performs.

Readers, would you buy equity in the restaurant industry or does buying in the restaurant sector seem too risky?

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Young is a writer and former owner of Young and Thrifty and the main "twitter' behind Young and Thrifty's twitter account. She lives in Vancouver, BC and enjoys long walks on the beach, spending time with her anxious dog, and finding good deals. If you like what you read, consider signing up for email updates.

18 Comments

  1. Financial Uproar on March 30, 2011 at 10:58 am

    I guessed Boston Pizza. I guess I’m not getting any free steak from you 🙁

    With the economy improving, the company should do fine. There are all sorts of restaurants that are former trusts, why did you pick The Keg over all the rest?



  2. My University Money on March 30, 2011 at 8:35 pm

    Great, so last weekend when I was ordering Keg-Sized gin-and-sevens all night I was actually just supporting a fellow blogger. Good to know! For what it’s worth, I have never had negative experience there before.



  3. unbalanced on March 30, 2011 at 9:21 pm

    Did you consider buying A & W ?? Just curious. Thanks in advance



  4. Jason on March 30, 2011 at 10:43 pm

    I miss A&W. They shut the one down the block from me down.



  5. young on March 30, 2011 at 11:46 pm

    @Jason- I love A&W’s, pure Canadian-tasting-goodness right there 🙂 Sorry to hear the one near you shut down! There aren’t that many here in Vancouver either.



  6. young on March 30, 2011 at 11:50 pm

    @unbalanced- Thanks for commenting. I did definitely look at A&W. With the economy in distress, people tend to cheap out and fast food places tend to do well (case in point Macdonalds corporation). However, A&W’s P/E was higher than Keg’s (15.46 compared to 10.47), and their monthly distribution is less (6.36% compared to 7.25% annual yield). Also, its price point is a bit more expensive than the Keg’s ($22 currently compared to $13). So I decided to go for KEG.UN instead. Do you hold AW.UN?



  7. young on March 30, 2011 at 11:52 pm

    @My University Money- Hey you know that your blog’s acronym is MUM? 🙂 Thanks for Keg Sizing and Gin and Seven-ing it for me! I’ve never had a negative experience there either. The commercials are so alluring (good marketing, I tell ya!) and the service is just so good. Food is always good too, never been bad or inconsistent. It’s just a very consistent atmosphere and place to eat.



  8. young on March 31, 2011 at 12:01 am

    @Financial Uproar- Sorry Financial Uproar! That offer of free steak was directed at you too! 🙂 To be honest, I think I chose The Keg because I really like their company, I like their brand (I know people shouldn’t be buying stocks because they “like” the company), and I like their service. They are one of the top 50 employers in Canada, they seem to have good leadership, they have expanded into the US, and I see potential growth. I have only eaten at Boston Pizza once and I don’t remember having as great of an experience there as I usually get at the Keg. The waiters and staff at The Keg also seemed very efficient, yet very good at what they do. I know that Boston Pizza and Keg have similar financials, and I picked Keg because at least when I go out for that $50 a person meal once a year, now I can eat out with my dividend income! 😉



  9. My University Money on March 31, 2011 at 7:40 am

    Haha we realized our acronym is MUM, which is memorable if nothing else I suppose! The more I think about it, the more I would like the Keg as a long term investment even without the solid financial fundamentals simply because of it’s built in advantage or “Moat” as Buffett and the boys call it. Basically, the Keg’s brand as a the top of the pile in the steak restaurant industry bodes well for its long term success. It is very difficult to keep putting out a quality product (as opposed to fast food for example) at so many different places. The Keg also knows how to market to their demographic, I remember even years ago they were advertising all over TSN. So anyway, nice pick!



  10. BeatingTheIndex on March 31, 2011 at 12:15 pm

    I like your pick and love their food 🙂

    Would certainly pick KEG if I get the opportunity of buying under $13…



  11. unbalanced on March 31, 2011 at 5:39 pm

    To Thrifty. I haven’t bought any stocks yet. I’m trying to learn from you, your readers and other contributors here. Great info by the way. I pretended to buy 100 shares of the Keg and A&W each in January 2010 As to date A&W is up 40 % and the Keg is around 23%. I retired last year at 53 and am deciding to start reading and learning more about investing. Most of my stuff is with a financial clown and honestly I would have been better for me and my wife’s RRSP to be in GIC’s since 1999. I think dividends are the way to go. Sorry for rambling on and thanks for the work you do.



  12. young on March 31, 2011 at 11:53 pm

    @My University Money- Very true about keeping the consistency and quality the same despite a growing restaurant business, MUM. I remember as a kid going to The Keg on very very special occasions, and they were the only steakhouse we ever frequented. Though I wasn’t ever allowed to Keg size back then 😉 I think The Keg brand does well in Canada, esp. Western Canada, but it has yet to breakthrough in the States. The States has big brands like Morton’s etc.



  13. young on March 31, 2011 at 11:54 pm

    @BeatingTheIndex- Good to know you like it too! 🙂 Food and mining/silver stocks, that’s what I call a balanced portfolio! 😉



  14. young on March 31, 2011 at 11:56 pm

    @unbalanced- I’m learning lots about investing from my readers (thank you guys!) and other PF bloggers as well. Well, back in January 2010 everything was dirt cheap, the market rose substantially since then… hard to find value stocks these days. Congratulations on the early retirement (You’re living my dream!) and great idea on continuing to incorporate lifelong learning even during retirement! Dividends are the way to go (I have learned the hard way too), and don’t apologize for rambling (heck, I should be apologizing for my weekend ramblings all the time!).



  15. The Passive Income Earner on April 2, 2011 at 7:38 pm

    I had it in my short list but I went with Rogers instead. More potential upswing with stock appreciation with 4% yield. I am banking on them being a Canadian Dividend Aristocrats and enjoying dividend raise.



  16. young on April 3, 2011 at 11:34 am

    @The Passive Income Earner- Rogers is definitely cheap, I might look into that as I add more money into my TFSA. They did just increase their dividend it seems! Hope it stays low enough so I can get in on the action too 😉



  17. Echo on April 6, 2011 at 2:54 pm

    Fun fact – I was attended a restaurant marketing convention one time and the speaker said that the Keg would never take off in the U.S. as a high end steakhouse because Americans associate the word “Keg” with cheap beer and frat parties.

    Discuss.



  18. young on April 6, 2011 at 11:07 pm

    @Echo- Hehe… I think we associate the word “Keg” with cheap beer and frat parties here too… although likely more in the States with the emphasis on fraternities etc. I think the difference is that in the US, there are so many high quality steak houses, that a company like The Keg might not be able to break much ground in an already established sector of the restaurant industry. What do YOU think? 😉



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