Starbucks Corporation SBUX recently announced a hike in its dividend payout in an effort to return value to shareholders. The company raised its quarterly dividend by 8.9% to 49 cents per share. The new dividend will be paid on Nov 26 to its shareholders on record as of Nov 12.
Following the hike, the company’s new annualized dividend amounted to $1.96 per share. Based on the closing price of $112.17 per share on Sep 29, 2021, the stock has a dividend yield of 1.74%. In 2020, the company had raised its dividend by 10%.
In fact, dividend hikes not only enhance shareholder returns but also raise the market value of the stock. Therefore, companies often tend to attract new investors and retain the old ones through this strategy.
We appreciate Starbucks’ consistent efforts to enhance shareholder returns despite the coronavirus pandemic affecting most of the industries. These initiatives highlight the company’s business strength and sustainability of its cash flows.
In the past year, this Zacks Rank #3 (Hold) stock has gained 31.5% compared with the industry’s rally of 23.2%.
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Can Starbucks Sustain Dividend Hikes?
Ever since Starbucks initiated its dividend in 2010, the company has raised it in each of the previous 11 years. Starbucks is one of the most recognized coffee brands in the world. From espresso to specialty roast and ground coffee to premium single-serve market, Starbucks commands authority and a leading position in all coffee segments.
Despite the pandemic, the company opened 130 and 260 net new stores in third and fourth-quarter fiscal 2020, respectively. It also inaugurated 1,400 new stores in fiscal 2020. In the first nine months of fiscal 2021, Starbucks opened 635 net new stores worldwide, bringing the total store count to 33,295. The company expects to open nearly 2,150 (850 stores in Americas and 1,300 internationally) new stores and 1,100 (50 stores in Americas and 1,050 in internationally) net new stores worldwide in fiscal 2021. The company is benefiting from robust U.S. comps growth.
Backed by Starbucks' global presence, strong expansion efforts, robust digitalization and comps growth, and strong cash and cash equivalent, the company will be able to sustain shareholder-friendly moves in the future as well.
Solid Restaurant Bets
Some better-ranked stocks in the Zacks Retail - Restaurants industry include Jack in the Box Inc. JACK, Chipotle Mexican Grill, Inc. CMG and The Wendy's Company WEN, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Jack in the Box has a trailing four-quarter earnings surprise of 26.4%, on average.
Chipotle’s earnings for 2021 are expected to rise 137.5%.
Wendy's earnings for 2021 are anticipated to increase 42.1%.
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