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Starbucks Enhances Shareholder Value With 10% Dividend Hike

Zacks Equity Research
·3 min read

Starbucks Corporation SBUX recently announced a hike in its dividend payout in bid to boost shareholder value. The company raised its quarterly dividend by 10% to 45 cents per share. The new dividend will be paid on Nov 27 to its shareholders on record as of Nov 12.

Following the hike, the company’s new annualized dividend amounted to $1.8 per share. Based on the closing price of $85.92 per share on Sep 30, 2020, the stock has a dividend yield of 2.1%. In September 2018, the company had raised its dividend by 20%.

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.

Kevin Johnson, Starbucks president and CEO said “The Board’s decision to raise our quarterly dividend demonstrates confidence in the strength of our recovery and the robustness of our long-term growth model. Our cash flow generation is strong, and we remain committed to reducing our financial leverage while continuing to invest for future growth.”

Factors Supporting Dividend Hikes

A favorable financial position has helped Starbucks to raise dividend and pay at regular interval. It ended third-quarter fiscal 2020 with cash and cash equivalent of $4.2 billion. Overall, the company continues to benefit from solid execution of several initiatives in the United States and China. Further, best-in-class loyalty programs and digital offerings are expected to drive profits.

Stock Price Performance

In the past six months, the company’s shares have gained 32.2%, compared with the industry’s rally of 42.9%.

The Zacks Rank #2 (Buy) company is strengthening its product portfolio with significant innovation with regard to beverages, refreshment, health and wellness, tea and core food offerings. Starbucks is leaning toward fast-growing categories like Cold Brew, Draft Nitro beverages, and plant-based modifiers, including almond, coconut, and soy milk alternatives. Apart from the numerous beverage innovations, Starbucks has also been making an effort to offer more nutritional and healthy products to customers.

Other Key Picks

Some other top-ranked stocks, which warrant a look in the same space include BJ's Restaurants, Inc. BJRI, Chuy's Holdings, Inc. CHUY and Jack in the Box Inc. JACK, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

BJ's Restaurants has a three-five year earnings per share growth rate of 15%.

Chuy's Holdings has a trailing four-quarter earnings surprise of 87.3%, on average.

Jack in the Box’s 2021 earnings are expected to surge 16.1%.

Zacks’ Single Best Pick to Double

From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.

With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.

The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.

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