Tim Hortons Inc. is boosting its dividend by 31 per cent after reporting a jump in fourth-quarter profit thanks to a big gain from the sale of its interest in Maidstone Bakeries.
Fourth-quarter net earnings increased to $377.1-million, or $2.19 per share, from $91-million, or 51 cents per share, in the comparable quarter of the prior year, the company said Wednesday.
Included in its earnings was a pre-tax gain of $361-million from the sale of its 50-per-cent stake in Maidstone, an Ontario bakery the company was forced to sell last August after its Swiss partner invoked a contract provision forcing the Canadian fast food chain to either buy or sell.
Sales slipped to $437-million from $464.6-million a year ago, which was partly due to the impact of an extra week in the fourth quarter of 2009 for accounting purposes. Overall revenue, which also includes revenue from Tim Hortons franchise operations, declined 3.5 per cent to $643.5-million.
Same-store sales, sales at locations open at least a year, were up 3.9 per cent in Canada and 6.3 per cent in the United States.
"Our fourth-quarter results include a number of significant items but our underlying business enjoyed strong same-store sales performance, and we met or exceeded our key goals for the full-year," president and CEO Don Schroeder said in a statement.
"Our strategy execution is focused on continued growth in Canada, accelerated, targeted investments in our core U.S. markets to drive further progress, and beginning to lay the seeds for longer-term international growth."
Excluding one-time charges in the quarter, the company said it earned 51 cents per share for the quarter. The average analyst estimate had been for a profit of 54 cents per share, according to Thomson Reuters.
Shares in the company were up 41 cents at $41.86 on the Toronto Stock Exchange on Wednesday morning.
The dividend hike will increase the quarterly payout on Tim Hortons stock to 17 cents per share, up from 13 cents.
The company said it plans to buy back up to 10 per cent of its stock in 2011 - about $445-million worth - continuing a move to reduce its public float that began last year when it received the cash from the Maidstone sale. Companies typically buy back shares to reduce the number outstanding and strengthen the value of the remaining stock in the public market.
Earnings per share are projected to come in between $2.30 and $2.40 in 2011, with same-store sales growth between 3 and 5 per cent in both Canada and the U.S. and capital spending between $180-million and $200-million, the company said.
"We have a focused strategic road map designed to drive long-term shareholder value," Mr. Schroeder said.
"In 2011 we plan to continue investing in future growth as we execute our operational strategies and we believe we are well-positioned for continued success."
For all of 2010, the chain earned $624-million or $3.58 per share, compared to $296.4-million, $1.64 per share, in 2009. Annual revenue increased 4 per cent to $2.54-billion.
Based in Oakville, Ont., Tim Hortons is Canada's biggest restaurant chain and the fourth-biggest in North America with more than 3,700 restaurants.
The company has recently been expanding its market, with a master license agreement with Dubai-based Apparel Group to open up to 120 restaurants in the United Arab Emirates, Qatar, Bahrain, Kuwait and Oman over the next five years.
In December, Tim Hortons said increasing e-mails from Americans asking for better access to its products led to the opening of an online store to ship ground coffee tins, boxed tea, and mugs to American customers at identical prices as in-store.
The company began accepting Interac debit cards as payment across the country in November after an extended test period in Western Canada showed cards would not slow down cash registers.
Late last year, Tim Hortons said it would close 54 locations in New England, a money-losing market for the company, where it faces strong competition from locally-headquartered Dunkin Donuts.
Since opening its first U.S. store in Buffalo, N.Y., in 1985, Tim Hortons has expanded to over 600 stores in a dozen states - including Michigan, Ohio, Kentucky and West Virginia - and plans to open another 300 locations over the next three years.