Starbucks Corporation (SBUX) Continues To Lead The Pack

Tim Hortons Inc. (NYSE:THI) is the Canadian-focused coffee company that is looking to expand more into the U.S. We like Tim Hortons’ expansion opportunities that will drive its 12% five-year expected growth rate. Couple this with its 16x forward P/E and 22% debt-to-equity – much lower than Dunkin’s – and we see Tim Hortons as a better buy than its rapidly expanding peer Dunkin. Tim Hortons saw billionaire Jim Simons up his stake over 200% last quarter (check out Jim Simons’ big bets).

McDonald’s Corporation (NYSE:MCD) is one of the more diversified restaurant and coffee stocks listed; that’s right, McDonald’s announced it would begin selling McCafe ground and whole bean coffee in third-party stores (via Local 12). The announcement was made in early October, and we don’t have a timeframe, but it’s a situation worth keeping up with.

This fast food chain is also one of the more geographically diverse companies among the industry’s behemoths, and offers investors a solid dividend that yields 3.4%. We like the dividend yield, and McDonald’s long-term EPS growth rate (8%) is solid, but below what annual growth has been the past five years (18.1%). The fast food chain did see mega-billionaire Bill Gates become its top shareholder last quarter (see all of Bill Gates’ top picks here).

We believe that Starbucks remains the undisputed leader in the retail coffee industry and is now making its way into the home with the introduction of its single serve coffee machine. Starbucks is one of the top ten restaurant stocks loved by hedge funds (see all 10 here).