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Starbucks, the Doorway to the World

I remain bullish with Apple and will remain so as long as their numbers stay reasonably close to recent reporting. I explained in Put Away the Prozac, Apple's Just Fine why Apple is an even better investment now with the current price discount.

I have paid particular attention to another company that shares many of the same qualities as Apple. Starbucks (SBUX - Get Report) is growing revenue and earnings at a significantly higher rate than the average stock. Both companies enjoy revenue and margins particularly higher than their respective peers.

It's a unique combination to maintain margins while still growing. Both companies have found the "fountain of wealth" and maintain oversized margins as a result of the incredible pricing power they command. Starbucks has a gross margin of 56% compared to 17% at Caribou Coffee (CBOU) and 39% at McDonald's (MCD - Get Report).

McDonald's margins may be in the same ballpark as Starbucks, but Starbucks is growing much faster based on the last year and appears poised to continue. After reallocating assets during the start of the economic downturn, Starbucks is on the offensive again and leadership has their eyes on a bigger prize than the U.S. market.

Starbucks announced expansion plans including the Middle Kingdom. During my trips to China, I experienced no difficulty finding Starbucks locations in all the major cities I traveled to. Starbucks has the cash to make it happen. After adjusting for debt, cash on hand is $1.5 billion and climbing with every cup of Joe sold.

Starbucks doesn't keep all the cash they generate either. Investors receive a forward-looking yield rate of about 1.6%. Starbucks won't get confused for an old-school yield play anytime soon, but the dividend adds a nice bonus to an already attractive stock.

Think Starbucks pricing power may be waning? Think again, Starbucks' products are basking in "need it now!" high demand. Want proof? Who else is legitimately able to offer a cup of coffee for $7 and get it? Forget about the coffee for a minute, Starbucks recently offered a limited edition $450 stainless steel gift card. Starbucks sold 5,000 steel cards to the general public. How many cards are still for sale? Zero. Starbucks sold out in about five seconds after they went on sale. For those keeping track, that's $2.25 million in sales (in five seconds).

Buyers lucky enough to get their fingers on a Starbucks Metal Card are not exactly having a bout of buyer's remorse either. Buyers are more than willing to hand over $1,000 on eBay (EBAY - Get Report) and sellers are only offering the card at a substantial premium.

If a dividend-paying, margin-leading, profitable company is a good fit for your portfolio, add Starbucks to your portfolio.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
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