Safe Dividend Stocks for the Next Market Crash: Starbucks (SBUX)
SBUX Dividend Yield: 1.8%
5-year Annual Dividend Growth Rate: 24.9%
Over the past year, the world’s largest premium coffee seller has seen its shares remain about flat while the market has soared more than 20%. That’s thanks to concerns about slowing same-store sales as well as the retirement of Starbucks Corporation (NASDAQ:SBUX) founder and CEO Howard Schultz.
However, unlike the last time Schultz retired and was replaced by Jim Donald — who watered down the brand and led to years of stalled growth and falling profitability — this time, investors are left in the capable hands of Kevin Johnson.
Johnson was the COO for the past two years who oversaw the company’s successful expansion into the faster growth of emerging markets such as China, where sales have been growing at a 30% clip.
In fact, Starbucks’ current growth plan calls for doubling its Chinese store count to 5,000 over the next five years, while total store count is expected to grow 12,000 (50%) over that time.
Combined with ongoing margin improvement, courtesy of Starbucks’ increasing use of mobile to shorten the time customers wait at the counter (thus boosting throughput), SBUX could achieve about 10% long-term sales growth and even better earnings growth.
More importantly for dividend lovers, with a low FCF payout ratio of 41%, the Starbucks dividend remains not just safe, but likely to continue growing quickly, at around 17% to 18% per year.