Starbucks Corporation is 1 Dividend Stock for the Next 10 Years
Growth and Income Investors Should Consider SBUX Stock
Starbucks Corporation (NASDAQ:SBUX) stock is a very unique retail company that specializes in coffee and operates in more than 75 countries around the world.
Now you may be wondering what makes Starbucks so unique. After all, it’s simply is a chain of coffee shops, isn’t it?
Well, Starbucks has gone beyond being “just coffee shops” by creating its own culture, in part through its customer service. It is not uncommon for employees and customers to have built personal relationships based on seeing each other on a very frequent basis, which has become a proven concept within the company. Let me explain this further.
One of the most difficult things for retailers is having and maintaining a loyal customer base. This is because customers have the freedom to visit other businesses. Many companies prioritize solving this problem because marketing to repeat customers is easier than trying to attract new ones.
Starbucks has attempted to address this using a rewards program app. The app provides insight on the behavioral patterns of loyal customers and, based on those patterns, the marketing team can create targeted campaigns. Over 12 million customers have downloaded and registered the app, with year-over-year growth in the double-digits and a retention rate of 94%. (Source: “Starbucks Presents Its Five-Year Plan for Strong Global Growth Fueled by a Robust Pipeline of Innovation at Biennial Investor Conference,” Starbucks Corporation, December 7, 2016.)
One reason for such a high retention rate is the convenience for the end user. Other than collecting rewards, users can make purchases through the app for in-store pickup. This gives Starbucks two methods of marketing to its app users: through the app itself, and through the physical stores. This method could result in the average dollar transaction and the number of units growing over time, which—needless to say—would be profitable over both the short and long terms.
Another area of growth for SBUX stock is the total store count. Over the next five years, the company plans to open approximately 12,000 new stores globally. That is an increase of 50%, based on the current number of stores. Over this same period, projected earnings per share (EPS) growth is expected to be in the double-digits, compounded annually. (Source: Ibid.)
This will broaden the customer base, many of whom will hopefully become loyal. As for existing repeat customers, their number of visits could increase due to the convenience of the store locations. This also stands to increase the number of user of the rewards app.
Get Paid to Wait
SBUX stock is currently trading at $55.21, with a dividend yield of 1.81%. A dividend of $0.25 per share is paid on a quarterly basis and has grown 135% over the past five years. At the current pace, further increases are likely.
Another piece of evidence of dividend growth is SBUX stock’s payout ratio of approximately 46%. This means for each dollar of earnings, $0.46 is paid out via the dividend. Therefore, there is an opportunity for patient investors to get paid to wait for future growth to hit the financial statements.
Final Thoughts On SBUX Stock
Shares of SBUX stock have been flat over the last year, but past performance is no guarantee of future results. This is why it is important to view an investment opportunity from a forward-thinking perspective.
There are a lot of positives to look forward to, such as an increase in stores, EPS growth, and a rise in app users. And all of this growth could be reflected in the dividend as well.
Dear Reader: There is no magic formula to getting rich. Success in investment vehicles with the best prospects for price appreciation can only be achieved through proper and rigorous research and analysis. We are 100% independent in that we are not affiliated with any bank or brokerage house. Information contained herein, while believed to be correct, is not guaranteed as accurate. Warning: Investing often involves high risks and you can lose a lot of money. Please do not invest with money you cannot afford to lose. The opinions in this content are just that, opinions of the authors. We are a publishing company and the opinions, comments, stories, reports, advertisements and articles we publish are for informational and educational purposes only; nothing herein should be considered personalized investment advice. Before you make any investment, check with your investment professional (advisor). We urge our readers to review the financial statements and prospectus of any company they are interested in. We are not responsible for any damages or losses arising from the use of any information herein. Past performance is not a guarantee of future results. All registered trademarks are the property of their respective owners
Sign up to receive our FREE Income Investors newsletter along with our special offers and get our FREE report:
5 Dividend Stocks to Own Forever
This is an entirely free service. No credit card required. You can opt-out at anytime.
We hate spam as much as you do.