Starbucks shares (SBUX) - flavorful coffee and profitable investments
Starbucks operates all over the world: North and South America, Europe, the Middle East and Africa, and China/Asia-Pacific. The coffeehouses offer coffee and tea and sell packaged roasted coffee beans and ground coffee. In addition to operating its own network of coffee shops, the company sells licenses to use its trademarks. As of the end of March 2016, the company owned 23,921 coffee shops. Starbucks Corporation was founded in 1985 and is based in Seattle, Washington.
About Starbucks stock (SBUX)
Starbucks shares are trading at American stock exchange NASDAQ since 1992, the ticker of the company to search the site of the exchange, as well as other sites that provide information on stock quotes, SBUX.
During the last month the price of one share fluctuated in the range of $57-61. THE PRICE OF A STARBUCKS STOCK HAS BEEN IN THE $57-$61 RANGE FOR THE PAST MONTH. Over the past two years, the price of Starbucks stock has risen from $35 to nearly $60. THE PRICE OF THE STOCK HAS RISEN FROM $35 TO NEARLY $60 IN THE PAST TWO YEARS. SBUX is on the list of S&P 500 IndexThe U.S. is the largest 500 companies in the U.S., which is compiled by Standard & Poor's rating agency.
Starbucks stock isn't cheap right now - almost 22 times 2016 earnings per share. But in today's market environment, that's good enough value compared to other stocks that investors love, like Coca-Cola (KO), Pepsi (PEP) or Colgate (CL).
Analysts forecast annual revenue growth of 10% over the next 10 years. This will lead to earnings per share growth of 10-15%.
Why invest in Starbucks today?
Starbucks has one of the most sustainable business models. Its main product, coffee, is addictive, and its tea business is a great complement, especially for the fast-growing markets in Asia, where tea is more popular than coffee. The Starbucks brand is an intangible asset that allows it to practice a high-pricing strategy and protects the company from the fierce competition that usually characterizes restaurant stocks.
Moreover, the business model is fully scalable. Coffee and tea are loved all over the world, and the operating environment of the business can be replicated anywhere in the world. Compare this to the business model of another investor favorite, Chipotle Mexican Grill (CMG), where it takes much longer to expand overseas, given the supply chain requirements.
And while Starbucks has grown tremendously over the past couple of decades, the current growth is also very significant. In the U.S., the company is still showing 5-10% growth, which is very remarkable with a market capitalization of $90 billion. There are tremendous opportunities for the company now overseas as well. This includes both increasing sales in existing stores and opening new stores.
For example, China now has about 1,800 coffee shops, and analysts predict that this number could increase fivefold over the next decade. Starbucks is also testing the African region. The first coffee shop has already opened in Johannesburg. Investing in Starbucks today is akin to investing in McDonald (MCD) a couple of decades ago.
Finally, only a company with the same characteristics and excellent management can be better than a company with a sustainable business and a long-term competitive advantage. And Starbucks' management is just that. Howard Schultz is a visionary executive who sticks to the expected trends and leads the company in the right direction. The tea business has been a masterful move. Order & Pay's mobile platform has also been a success, driving revenue growth.
About the Starbucks stock dividend (SBUX)
As far as dividends are concerned, the company does not look very attractive right now. The stock's yield is barely above 1.3%. But Starbucks will show big dividend growth in the coming years. In fact, it already is.
Since 2010, when the company began paying dividends, their amount has increased fourfold. The last dividend increase was 25%. Of course, it is difficult to maintain such an increase over several years. But difficult does not mean impossible. If the company maintains this pace, by 2025 the dividend will have increased sixfold.
Company fundamentals
The company's revenue has been growing for the past 10 years.
The company has a positive dynamics of profitability ratios.
Gross margins, operating margins, and net margins also show growth over the 10-year period as a whole.
Starbucks is steadily increasing its cash flow.
The graph below shows an increase in cash flow for payout dividends.
Conclusion
Of course, like any other investment, Starbucks stock (SBUX) is not without risk. Stock markets may slip into recession in the coming years, or the company's plans may not materialize. Nonetheless, Starbucks represents a combination of growth opportunities, a low-risk business model, and excellent management, making it an excellent candidate for investment.