Starbucks — The Dividend Pick
Starbucks (SBUX: NY), the largest coffee chain announced its quarterly dividend increase from $0.49 to $0.53 per share. An increase of 0.8% will take effect on November 25, 2022, to shareholders following the record on November 11, 2022.
Starbucks initiated its dividend in 2010 and has increased it in each of the past 12 years.
As of September 28, 2022, SBUX’s price closed at $87.11 with a 3.36% increase.
Should you still ‘buy’ Starbucks stock?
Shares of Starbucks have dropped more than 25.53% YTD. Compared to a year ago, it is trading at a discount.
Despite the recession or not, Starbucks will continue to lead the coffee industry. People will continue having coffee and social media like TikTok and Instagram will flourish with photos of Starbucks coffee, merchandise, and others.
Starbucks might not need an introduction. Nevertheless, let’s dig into it.
Since 1971, Starbucks Coffee Company has been committed to sourcing and roasting arabica coffee. Today, available in 80 countries with nearly 35,000 stores worldwide, and a strong branding presence — Starbucks provides consistent drink and food items across the U.S.
Starbucks has made it easy for customers. With a single app where customers can top-up monetary value, it also provides a rewards program that keeps customers coming back. Basically, Starbucks is practically a data management system and a technology company. With the apps, Starbucks is able to collect and leverage more data to improve its product offerings and customer experience.
From a stock market point of view.
Starbucks is a blue-chip stock with strong fundamentals and a history of rewarding investors. Insider trading might not always be a good indicator. Even so, it is usually the decision that might be triggered by a certain force. Especially when a magnitude amount of buying force suggests conviction in a brighter future.
Mellody Hobson, Starbucks’s Independent Non-Executive Chair spent a whole sum of US$5.1m on stock at an average price of US$92.58.
In addition, Starbucks will be under the new leadership of Laxman Narasimhan. According to Starbucks, Narasimhan will join the company in October. He will be working closely with interim CEO Howard Schultz during the transition period, which is scheduled to end in April 2023.
Starting in April 2023, Narasimhan will become CEO, and Schultz will leave his interim role. The current head of Reckitt Benckiser, UK-based consumer goods, and former Chief Commercial Officer of PepsiCo expected to light Starbucks to a better path.
As reported last mid-September, Starbucks plans to increase its store numbers in its second-largest market, China by 50% to 9,000 stores by 2025. This is a projection to double its sales and quadruple its operating income. The decision is in line as a combat mode after being outnumbered by China’s homegrown brand Luckin Coffee this year.
Starbucks Reinvention Plan
Starbucks introduced a three-year road map from 2023 to 2025 — The Reinvention Plan. The company’s global store portfolio is expected to grow by roughly 7% annually on a net basis, an increase from the previous estimate of approximately 6%. Along with the Reinvention plan, it is expected to deliver net new store growth of 3% to 4% annually, compared to an approximate estimation of 3%.
Starbucks plans to resume its share buyback program reinstituting a healthy return of shareholder capital, yielding an annual EPS benefit of approximately 1%, net of incremental interest, beginning of 2024.
No one can really guarantee the direction of stocks in the short term. However, if you’re a long-term investor or dividend investor, thus it might be a good reason to purchase Starbucks shares at discounted prices.
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