Starbucks (SBUX) had a marvelous 2021 year. Further, quarter-1 2022 has already provided significant and promising results. Starbucks coffee lovers are still waiting in long-lines in a post-pandemic, inflation infiltrated time period that we are in. Revenue is up over 19% for quarter 1, bringing in over $8 billion of revenue, net earnings up 30% since the same-linked quarter, BUT one item doesn’t make sense.
Starbucks stock is DOWN 20% so far in 2022! Hence why this might be a great dividend growth stock to buy now! Check out the article!
Starbucks (SBUX) Stock
Talk about falling from highs. In fact, the 52-week high for Starbucks stock was $126. The stock is now down almost $33 per share or 26%! What is going on with Starbucks stock?!
Investors and analysts are predicting lower earnings for this coffee and global icon giant. Starbucks slightly reduced their guidance for 2022, though they crushed quarter-1 for 2022, which is interesting. The company is facing strong headwinds from supply chain and – due to that – inflation, aka rising costs. In addition, the labor market is absolutely crazy right now, with unions and employees with almost all of the leverage.
Therefore, the stock price has plummeted in 2022, which has dividend investors very happy. Why? Dividend investors love when dividend growth stocks go on sale. Could this be a chance to buy passive income, for less, relating to Starbucks stock? Time for a dividend stock analysis on Starbucks stock.
starbucks dividend stock analysis
As you know it’s time to review Coca-Cola with the Dividend Diplomat Stock Screener! Here, we focus on 3 main dividend stock metrics:
1.) Price to Earnings Ratio (P/E): We look for the price to earnings ratio < the S&P 500 and the competition.
2.) Dividend Payout Ratio: The preferred dividend payout ratio is < 60%. In fact, we believe the perfect payout ratio is between 40% and 60%.
3.) Dividend Growth Rate: Given we are dividend investing on our way to financial freedom, as we believe dividend income is the best source of passive income, we look at the 5 year dividend growth rate. In addition, we review how many years the company has increased their dividend.
1.) P/E Ratio: Starbucks has a price to earnings ratio, as of February 11th of 23.97. This is right under the S&P 500 p/e ratio of 25x earnings. McDonald’s (MCD) p/e ratio is also around 23. Therefore, fairly valued right here.
2.) Dividend Payout Ratio: Starbucks pays a nice $0.49 per share, per quarter dividend or $1.96 per year. Given the expected earnings are $3.91, Starbucks has a dividend payout ratio of 50%, perfect! Still room to grow and definitely room to maintain their dividend.
3.) Dividend Growth Rate: Though not a dividend aristocrat, Starbucks has increased their dividend for 11 straight years, at a growth rate of 16%. Now, the last dividend increase stood at 9%, going from $0.45 to $0.49. If Starbucks elects another $0.04 increase, that is 8% and a $0.05 increase is 10%. What will Starbucks do in 2022?!
Lastly, we’ll take a look at the dividend yield. As an investor, you want to know how much owning this dividend stock pays you now! The yield for Starbucks is 2.09%, which is approximately 70 basis points higher than the market. In addition, their currently yield is 22 basis points higher than their 5 year average, very good indeed!
is starbucks a dividend stock to buy?
Now that we’ve gone through the metrics, is Starbucks a stock to buy for the dividend stock portfolio?
What an iconic brand and logo, that Starbucks (SBUX) has. As an investor, you have to love the brand loyalty and recognition that Starbucks commands. Those lines definitely do not ever become any shorter, by any means.
There are plenty of negative headwinds right now for Starbucks. You have 3 massive items – supply chain issues that is causing inflation and rising costs. You then have the union and labor issues, causing increases in price (due to paying more for hourly rates and salaries), not to mention a possible lower quality. Then, you also have rate increases on the horizon.
All this has sent Starbucks price to the sub $95 mark. I have been buying a share here and there of Starbucks at $95.00. To buy more, I’d consider a price point of $92 for my next purchase point on Starbucks.
If you head over to our YouTube channel, you’ll find other undervalued dividend growth stocks that are higher on my list for stocks to buy now!
How about you? Do you own Starbucks stock? Do you think Starbucks is a stock to buy now in this significantly volatile stock market? Share your comments and feedback below!
As always, thanks for stopping by, good luck and happy investing!
-Lanny