Last March, I wrote a post recommending Bab Inc. (symbol BABB.ob) as an interesting income play. Today, Bab was out with its second quarter earnings report, and the news is very good. Bab earned 4 cents per share compared to the 2 cents per share earned last year in the same quarter. There was a special item of "franchise settlement revenue" that was included in this year's numbers that made up most of the difference, but that does not diminish the good news completely. Bab is a company that franchises its restaurant concepts, so the key metric is the royalty fees from franchised stores. That figure was up 5.5% YOY. In today's troubled retail climate, a 5.5% growth rate is reasonably good. Further, since the reason to buy Bab is the regular dividend return of just under 7%, today's earnings report makes clear that the dividend seems secure. Indeed, we may see a special dividend at year's end as has been the case in the past.
On another front, Bab has announced a new franchise concept which marries its muffin stores with a frozen yoghurt outlet. We will have to wait a few more months to see if this concept has attracted much interest, but it is an area that could lead to substantial growth.
For the moment, however, Bab is a good stock for a long term purchase that returns a dividend of nearly 7% or perhaps over 10% if there is a special dividend this year.
DISCLOSURE: I remain long Bab stock.
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