The market’s current state of volatility has presented a great opportunity for investors to snap up long-term investments for bargain basement prices.
One expensive stock that has gone on sale in recent months is specialty coffee chain Starbucks Corporation (SBUX).
Starbucks stock has fallen nearly 7% over the past three months and although its share price of $57.67 still accounts for the firm’s future potential, the company is a great buy for long-term investors.
Starbucks stock is the kind of investment you want to hold on to for several reasons, one being its dividend payments. The company’s 1.25% dividend yield may not sound like much, but there is a lot of potential for growth in that figure throughout the coming years.
Since SBUX stock began paying dividends in 2010, the company has consistently raised its payout each year. With a current payout ratio of 44%, most are expecting to see that trend continue.
Starbucks Stock: Room To Grow
While Starbucks has made its name in the coffee industry, the firm has been working to expand its offerings and change with the times as consumers look to shop locally.
Not only is the SBUX planning an after-hours menu that includes alcohol, but Starbucks has also started partnering with local bakeries in places like New York and Washington DC to offer regional treats.
Starbucks is also embracing the recent craft beer revolution by creating a coffee-tasting experience at its flagship store in Seattle. The firm’s new “Reserve Roastery” allows customers to see how coffee is made, sample different roasts and enjoy specialty beverages not offered at other locations.
This shift toward craft-brewed coffee demonstrates Starbucks’ ability to keep its finger on the pulse of what American consumers are demanding.
SBUX Expanding to China
Starbucks has also been investing heavily in China, a market that CEO Howard Shultz believes could eventually overtake the U.S. as the firm’s largest.
While China’s current economic climate has caused some setbacks, Shultz is upbeat about the potential. Despite the fact that the company’s most recent earnings report showed that comparable sales in China were flat, Shultz pointed to improving return on investment on new Chinese locations, saying that represents a positive sign for future growth.
A Leader in Mobile
However, perhaps the most compelling reason to buy Starbucks stock is the company’s strength in technology. The coffee chain has developed one of the most successful mobile rewards programs in the industry, which is set to continue growing this year.
Starbucks’ mobile rewards introduced a new payment feature last year which proved to be wildly successful. A staggering 21% of the company’s transactions were carried out using the app, a great turnout for such a new feature.
The firm now boasts 11.1 million active users, an impressive figure that will likely continue supporting the firm’s bottom line as the app allows consumers to spend money even when they aren’t in-store.
The mobile app is important to Starbucks’ business for many reasons, one of which is that it allows the firm to manipulate customer behavior.
Starbucks is able to use the app to draw people in during slow times by offering better rewards on transactions made during specific time periods. The app also promotes customer loyalty by accumulating discounts and providing incentives to return to the store.
Perhaps the most important benefit of Starbucks’ mobile app is the fact that it gets people to spend more money. Paying without having to hand over cash supports overspending and impulse buys; so Starbucks benefits from the ease with which people are able to spend at its locations.
This year, the firm is planning to capitalize on a new feature that will allow mobile users to order and pay for their beverages without waiting in line. The new offering is expected speed up wait times during busy periods and get more people interested in signing up for and using the app.
While some might argue that Starbucks stock is still an expensive buy despite the dip, the stock is a reliable performer with strong future prospects.
SBUX isn’t the kind of investment you buy and sell frequently because the stock doesn’t typically rise and fall violently with the rest of the market.
However, the firm’s solid financials and exciting future prospects make it a relatively safe bet for long-term growth.
As of this writing, Laura Hoy was long SBUX.
