Starbucks Stock has Upside Ahead Amid the Dividend Increase
Starbucks stock price recovery is gaining momentum as the company shows confidence in its future fundamentals and cash generation potential. This is evident from the quarterly dividend increase of 10% to $0.45 per share. This marks the tenth consecutive year of a dividend increase.
“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,” said Kevin Johnson, Starbucks president, and CEO.
“Our cash flow generation is strong, and we remain committed to reducing our financial leverage while continuing to invest for future growth,” Johnson added.
Market analysts have also started showing confidence in the coffee chain. Cowen has raised its rating from market perform to outperform, saying it’s the perfect time to buy Starbucks stock. The firm also expects double-digit revenue growth in the coming years.
Starbucks has topped analysts’ consensus revenue and earnings estimates for the third quarter. Although its revenue fell 38% from the past year period due to pandemic, the revenue still topped analysts estimate by $127 million. Its loss per share of $0.46 beats consensus by $0.15 per share.
The company expects its fourth-quarter revenue to decline almost by 17% year over year. The pace of sales decline is dropping sharply while analysts expect restaurants to take some time to rebuild the momentum.
For the full year, Starbucks anticipates sales to fell in the range of 12% to 17% from the past year period. The earnings per share are likely to stand around $0.83 to $0.98 compared to the consensus for $0.81.
Starbucks stock price is currently trading around $85, with a dividend yield of 2%. The shares of the coffee chain grew 27% in the last six months but shares are still trading in a negative territory year to date. The shares are down 4% in the past twelve months. The pandemic has impacted its share price performance this year.