SBUX

Starbucks Corporation

86.57
USD
-0.62%
86.57
USD
-0.62%
68.39 117.80
52 weeks
52 weeks

Mkt Cap 102.08B

Shares Out 1.18B

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Starbucks Corporation (NASDAQ:SBUX) Pays A US$0.49 Dividend In Just Two Days

Starbucks Corporation (NASDAQ:SBUX) is about to trade ex-dividend in the next 2 days. The ex-dividend date is usually set to be one business day before the record date which is the cut-off date on which you must be present on the company's books as a shareholder in order to receive the dividend. The ex-dividend date is of consequence because whenever a stock is bought or sold, the trade takes at least two business day to settle. Accordingly, Starbucks investors that purchase the stock on or after the 11th of August will not receive the dividend, which will be paid on the 26th of August. The company's next dividend payment will be US$0.49 per share, and in the last 12 months, the company paid a total of US$1.96 per share. Last year's total dividend payments show that Starbucks has a trailing yield of 2.3% on the current share price of $85.73. Dividends are a major contributor to investment returns for long term holders, but only if the dividend continues to be paid. So we need to check whether the dividend payments are covered, and if earnings are growing. Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. Starbucks paid out 55% of its earnings to investors last year, a normal payout level for most businesses. Yet cash flow is typically more important than profit for assessing dividend sustainability, so we should always check if the company generated enough cash to afford its dividend. Over the last year it paid out 73% of its free cash flow as dividends, within the usual range for most companies. It's positive to see that Starbucks's dividend is covered by both profits and cash flow, since this is generally a sign that the dividend is sustainable, and a lower payout ratio usually suggests a greater margin of safety before the dividend gets cut. Click here to see the company's payout ratio, plus analyst estimates of its future dividends. Have Earnings And Dividends Been Growing? Businesses with strong growth prospects usually make the best dividend payers, because it's easier to grow dividends when earnings per share are improving. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Starbucks's earnings per share have been growing at 14% a year for the past five years. Starbucks has an average payout ratio which suggests a balance between growing earnings and rewarding shareholders. This is a reasonable combination that could hint at some further dividend increases in the future. The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. In the past 10 years, Starbucks has increased its dividend at approximately 19% a year on average. It's exciting to see that both earnings and dividends per share have grown rapidly over the past few years. The Bottom Line Is Starbucks an attractive dividend stock, or better left on the shelf? Higher earnings per share generally lead to higher dividends from dividend-paying stocks over the long run. However, we'd also note that Starbucks is paying out more than half of its earnings and cash flow as profits, which could limit the dividend growth if earnings growth slows. It might be worth researching if the company is reinvesting in growth projects that could grow earnings and dividends in the future, but for now we're not all that optimistic on its dividend prospects. While it's tempting to invest in Starbucks for the dividends alone, you should always be mindful of the risks involved. For instance, we've identified 3 warning signs for Starbucks (2 are significant) you should be aware of. Generally, we wouldn't recommend just buying the first dividend stock you see. Here's a curated list of interesting stocks that are strong dividend payers. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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