Lanny’s Recent Stock Purchase – Starbucks (SBUX)

I hope everyone got the gist that I was buying a stock from my July dividend stock watch list!  It surely did not take me long to deploy capital in a highly valuable company.  Now, I may not have bought a stock in the order I thought that I was going to do, but still fit in my plan for purchases.  It excites me to say, that the love for coffee, dividends and company culture, has engaged me to purchase stock into Starbucks Corporation (SBUX)!

The Stock Purchase – Starbucks Corporation (SBUX)

 

This isn’t the first time that any of us have purchased the wonderful green logo’d company.  Bert just made a sizable investment earlier and my fiance, actually, owns around 100 shares worth, as well (she loves Starbucks, so I pretty much asked – why don’t you own them?).  Outside of that, I always had thoughts on investing into Starbucks (SBUX), given what they do from a community and a, “gathering people together”, standpoint.  In addition, they’ve been going through headwinds, with Howard Schultz stepping away from the company, the CFO retiring and the announcement of domestic store closings.  Honestly, one could easily state there are way too many stores on top of each other!  Further, to offset the bad news, they also announced a 20% dividend increase (as a dividend investor, it just doesn’t get any better) and a statement to return $25 billion of cash in total (dividends and buy backs) through fiscal year 2020.

Dividend Diplomat Stock Metrics

  1. Price to Earnings: At $48.50 with a forward earning project of $2.48, this equated out to a p/e ratio of 19.5.  The ratio is easily in the range that I like to see and shows sign of undervaluation, as the S&P 500 is in the low 20’s.
  2. Dividend Growth: They recently announced a growth rate of 20%, which was par for the course.  Further, the 3 and 5 year dividend growth rate stands at over 23%!  See the Impact of the Dividend Growth Rate.
  3. Dividend Yield: With the $48.50 price point, at a dividend of $1.44, their yield was at 2.97%, well above the S&P 500 (on average) but just below my dividend yield, overall, on my portfolio.  However, that incredible growth rate makes up for the lower yield.
  4. Payout Ratio: Based on forward earnings of $2.48 and a dividend of $1.44 per year, this equates to a payout ratio of 58%.  This is definitely within the dividend payout ratio range I like to see.  See why the Payout Ratio is an extremely important metric.

Here is proof of my purchase:

In summary, I purchased 25 shares on 7/5/2018 of Starbucks Corporation (SBUX) at $48.50 with a $4.95 trading fee for a total cost of $1,217.45.  The 25 shares adds $36.00 to my forward dividend income project.  Further, their dividends are received on “off-months” or February, May, August and November.

Starbucks Corporation (SBUX) Stock Purchase Summary & Conclusion

Are you loving that coffee brew, as much as I am?  A dividend track record of Starbucks (SBUX), with a continuous line, extending to the door, is exactly the cup I want to drink.  They finally have come down to earth on their earnings multiple, and I was very happy to finally have shares of the roast in my portfolio.  I don’t expect 20%+ dividend increases going forward, but I expect the brand, loyalty and following to survive & continue on.  Though I only have $9 per quarter going forward, once my fiance and I are married, that will surely change.  What’s nice is that I am confident, all things remaining the same, that with the yield & modest growth rate, the $9 will become over $10 in a year.  I cannot wait!  This is also a new position in my portfolio.

What do you think of the purchase?  Like or hate the price point?  Do you have other insight that I don’t have?  Further, do you believe the company is losing it’s luster or has a lot further to decline?  Thank you for sharing your thoughts everyone and, as always, good luck and happy investing!

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22 thoughts on “Lanny’s Recent Stock Purchase – Starbucks (SBUX)

    • Tom –

      Thanks and the P/E is still just a bit up there, but they’ve never been at these levels, with where they are at this dividend stance, as well. I am looking forward to having a cup or two ; ) I actually do have a few inexpensive SBUX bags of coffee in the fridge, from a sale and coupon type of thing.

      -Lanny

  1. Hey Lanny –
    Yes, I got the gist from your prior post 🙂 .

    My favorite part about your purchase: “Further, their dividends are received on “off-months” or February, May, August and November.” I know this should absolutely not be a key factor for deciding which names to consider, but it’s good to get some “off-month” payers beyond the third month of each quarter. – Mike

    • Mike –

      You are right – the dividends coming in, when mostly others are not, is always a better feeling. I am very pumped for what’s to come with SBUX and how their recent shake up does for their financial statements.

      -Lanny

  2. Hi, Lanny. I like the purchase and the price point. I’m holding out for a slightly lower price than you got, if it ever gets there. I already have over 100 shares, so of course I don’t mind if SBUX recovers in price and I don’t add here. However, If I’m going to add I want to lower my cost basis a fair amount.
    I’m a tad worried to see Schultz step down from the CEO role, as things didn’t go so well the last time that occurred. We’ll have to keep a close eye on SBUX developments.

    • Engineering –

      Damn – that’s right. 100 shares is sick. I understand at the lower of cost basis – are you looking for the $46 range? I know.. Shultz was the man, and the glue to the “bux”, but – let’s see what consumers think, this go around and what the impact is to sales.

      -Lanny

  3. Great pick. Seems like everyone is talking about Starbucks now. Loyal customer base, great value. Plus the dividend growth has been fantastic. That $36 in forward dividends is likely to continue to grow.

  4. I’m a fan of the purchase and just added to my position on Friday with another 20 shares, although a bit higher than your entry point. I’m done adding to this position for now as I set my sights on a few other holdings, but I am definitely looking forward to that first payout as well.

  5. I did a small share of 13 at the beginning of the month. Slowly add to it over time as long as it stays a decent buy. Looks like a lot of people jumping on it. I would like them to keep the dividend increases between.04 and .06 a year for a couple of years

    • Doug –

      That’s not too small when you think about it, though! I agree on the dividend increases. Even if the yield stays around the 3%-3.25% with high single/low double digits – I’m fine, as long as their earnings grow faster : )

      -Lanny

  6. Lanny,
    Big fan of this move, did not add to my SBUX recently – did KHC instead, but it is in a very very sweet spot. Might be one of my next adds if these levels continue.
    – Gremlin

  7. I like the SBUX buy. It’s my July stock consideration but I still did not pick up any. I was on a family road trip and really didn’t pay much attention to the market, etc. Saw that it climbed nicely from its lows and went shopping elsewhere. Still may pick some up if it stays around $50. Keep buying and building!

  8. Looks like a good buy from a numbers standpoint. I’m a DD guy myself. The thing I find amazing about Starbucks is that they are located in most strategic places in shopping centers, malls, within big cities, etc.!

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