This website and its content are not intended to provide professional or financial advice. The views expressed here are based solely on the writer’s opinion, research, and personal experience, and should not be taken as factual information. The author is not a financial advisor and lacks relevant certifications in that regard. We highly recommend consulting a qualified financial advisor before making any investment decisions, as the information presented on this site is general in nature and may not be tailored to individual needs or circumstances.
Nowadays, everyone has well in mind the iconic Starbucks logo and where the closest location is, but could you imagine a period when Starbucks did not exist?
Starbucks was founded by Jerry Baldwin and Howard D. Schultz on November 4, 1971 in Seattle. Initially, they kept the company private but, after a few years of activity, in June 1992, they decided to go public. At the time, Starbucks only had 140 outlets and a market value of $271 million.
During the IPO (Ticker: SBUX) they decided to only sell 12% of the company for around $25 million, which allowed them to scale operations and double the number of outlets in the next two years. The initial public offering was a success, and Starbucks’ stock price rose by over 70% in just three months.
Today, after over 50 years of extremely successful business decisions and expansions, Starbucks owns more than 35,000 coffee shops in over 80 countries and generates a net income exceeding $3 billion per year.
Contents
Starbucks Stock Key Features
Dividends
Starbucks has been consistently paying cash dividends to its shareholders since 2010. Dividends are paid quarterly and the average dividend yield over the past years has been 1.86%, even though it has been subject to some fluctuations due to recent market conditions.
The fact that Starbucks pays dividends to its shareholders is a great benefit for those investors looking to receive regular payments without worrying about waiting for the stock price to go up and then selling it at the right time.
Additionally, the consistency with which the company has been paying dividends shows that they are situated in a comfortable position in the market, where they are able to profit without the need to reinvest a large portion of earnings.
Debt Level and Coverage
Starbucks corporation always managed to keep debt under control before 2020, but after the pandemic, some things changed. The company in 2019 had debt amounting to $11.23 billion, but then, in less than one year, it increased by almost one and a half times the initial amount.
Over the past three years, the debt has been decreasing, showing good signs of recovery, even though it is still worth $15 billion more than the free cash flows plus cash equivalents currently held by the company.
Ownership Structure
Even though in 1992 the company decided to only sell 12% of the business, today, over 97% of the 1.146 billion shares is free float.
Additionally, the market value of Starbucks currently exceeds $112.3 billion, materializing an increase of over 41,000% since the IPO.
Liabilities
Throughout its life, Starbucks was able to maintain a current ratio, calculated as current assets divided by current liabilities, over 1. However, in two years it fell to 0.77, showing that, at the moment, the company has more current liabilities than current assets.
Even though it is not a worrying sign if taken by itself, it is always a great indicator to keep track of as a current ratio below 1 could predict future solvency problems.
In addition, over the past years, long-term liabilities have outgrown long-term assets, showing potential problems also in the long run.
Revenues
Despite a drop of -12.7% in 2020, the company’s revenues have been steadily growing over the past years. This strong performance could be attributed to not only the marketing and the brand that have been generating customer loyalty even during periods of economic downturn, but also to the differentiation policy adopted by the company.
The fact that Starbucks is operational in so many different countries allows the business to compensate for location-specific losses thanks to its wider scope of operations.
Starbucks Stock Over the Years – Review
Over the past 5 years, Starbucks’ performance and dedication has been rewarded with a 71.92% increase in its stock price plus an average 1.82% annual dividend yield.
A clear cause for this strong performance is Starbucks’ net income. Even though it fluctuated significantly over the past 5 years, especially during 2020, the company was able to generate positive earnings throughout the period.
In addition to the net income, also the ROA and ROI, on average respectively around 12% and 30%, reflect the managerial abilities of the directors, who have achieved these great results over this financial period.
Starbucks Stock in 2023
Despite the year-to-date rally in the S&P500, Starbucks’ stock price decreased in value by 2.64%. However, it must be noted that the recent market rally has been spooled up only by the technology and communication services sectors, while the consumer defensive sector is down by 1.1% YTD.
On the other hand, many experts are expecting a strong recovery by the end of the year, with some projecting an increase in Starbuck’s net income by over 20%.
In addition, this year’s net margin has exceeded 10%, while the ROI hovers around 27% and the ROA slightly above 12%.
Starbucks Stock in 2022
Starbucks’ 2022 performance can be considered above average if compared to S&P500’s returns. During 2022, Starbucks’ stock price fell by 13.55% while the rest of the market suffered an average drop of over 20%.
There are two reasons behind the 2022 performance. Firstly, Starbucks is in the consumer defensive sector, so it usually benefits from smaller drawdowns and less volatility. Secondly, they managed to increase total revenues by over 10.9% during the year, leading to substantial profits regardless of the market movements.
Moreover, Starbucks registered a record-high dividend yield in 2022 amounting to 2.33%.
Starbucks Stock in 2021
Throughout 2021, SBUX’s price grew by 13.24%, while its earnings increased by 352.36% with respect to the preceding year.
Even though the extremely high growth in net income is partially explained by exceptionally low revenues during 2020, it is also true that in 2021 the net margin increased from 3.95 to 14.45.
Just as a reminder, to calculate the net margin we divide net income by revenues. The result measures the percentage of revenues that will be transformed into earnings after the costs and other expenses are deducted.
So, even though net income increased in 2021 due to the recovery of pre-pandemic operations, it is also true that the company managed to better allocate their resources, increasing their efficiency.
Starbucks Stock in 2020
As counterintuitive as it may seem, 2020 was a great year for SBUX shareholders. Despite an initial drop of over 40%, the price closed up 15.4% at the year’s end.
The main difficulties encountered by Starbucks weren’t based on stock performance, but rather on the lockdown policies adopted by governments all around the world which stopped customers from getting to the stores.
Even if during 2020, net income dropped by almost 75%, the net margin remained positive and the ROI fluctuated slightly below 10%. So, despite the short term difficulties, it was possible to notice that the underlying business was still relatively solid and the business was going to recover from it.
Additionally, during 2020, Starbucks continued to pay dividends to its investors with a dividend yield of 1.95%.
Starbucks Stock in 2019
Similarly to 2020, 2019 was a great year for the stock price which skyrocketed by almost 40%. On the other hand, while revenues increased by 7.21%, net income decreased by over 20% with respect to the previous year.
Because of this, the net margin decreased from over 18% to around 13%, showing a poorer allocation and management of resources.
However, during the same accounting period, Starbucks recorded a 16.6% ROA and a record-high 47.07% ROI. Finally, we must also note that the dividend yield in 2019 dropped from 2.22% in 2018 to 1.63%.
Nowadays, thanks to online brokers, there are many different ways in which it is possible to start building a stock portfolio online. These platforms offer many different financial instruments, including stocks, ETFs, Mutual Funds, Options, etc.
Each instrument has both its upsides and downsides, so you should carefully consider the potential risk, return, fees and commission of each scenario.
Undoubtedly, acquiring shares of the stock directly is the easiest way to start adding exposure to Starbucks. Additionally, this is also the way which, most likely, will spend the least on commissions and fees.
In this article we will use eToro as an example to show you how quick and easy it is to open an account and start adding Starbucks to your portfolio by using this online broker.
The second most popular investment method is an ETF. Exchange Traded Funds are a basket of stocks which you can trade as a single financial instrument. Even though ETFs might have higher fees than stocks, they have the benefit of being highly diversified, reducing the volatility and therefore reducing the investment risk.
Mutual funds instead, even if they might appear similar to ETFs, are much different. First of all, they have much higher fees and are less liquid than simple stocks or ETFs. However, there is a justification for the higher fees. Fund managers and experts actively manage mutual funds by inserting or removing stocks from the basket, ideally optimizing performance and increasing returns.
Finally, options contracts are financial derivatives that track the price of an underlying asset. However, the pricing structure of options is much more complex than the other financial instruments we have seen so far, so usually only experienced traders use these tools.
Nowadays, it is possible to add exposure to Starbucks stock through many different exchange platforms or online brokers. Regardless of what you choose, it is extremely important to carefully consider fees, taxes and the types of investment tools provided by the platform.
In our example of how to open an account and add Starbucks’ stock to your portfolio, we will use eToro.
Step 1: Open an Account
The first step once you open eToro’s webpage is to click on the Sign-up button. Once the registration page loads up, you will have to enter your name, email and to choose a password.
In addition, to make this process easier, you can also use your Google or Facebook account.
Step 2: Upload ID
The second step consists in verifying your identity. To do so, you will have to upload both a proof of identity (POI) and a proof of address (POA).
The POI can be an ID, a passport or a driver’s license. The POA instead must include the user’s full name, address and date.
Note: it is important that the document is issued at most three months prior to the registration.
Step 3: Make a Deposit
After you complete the verification process, you will need to fund the profile. It is possible to fund the account simply by using the “Deposit Funds” button in the eToro’s menu.
Step 4: Search for Starbucks
The fourth step consists in searching for Starbucks shares. You can do this by simply typing either the name or the stock’s ticker symbol in the search bar.
Regardless of the method you choose, eToro will display the most relevant search results.
Step 5: Add Starbucks to Your Portfolio
The last step is acquiring shares of Starbucks. After clicking on the invest button, you will be able to choose either the amount of funds you want to use or the number of shares of Starbucks you want.
Once you finalize the transaction, you will be able to see the newly acquired shares in your portfolio.
Summary
In conclusion, Starbucks does not only have a great logo and a loyal customer base. Starbuck’s stock has returned over 70% in the past 5 years while it generated a stable net income even during periods of economic downturn.
Additionally, Starbucks averaged a ROI of 30% and a ROA comfortably in the double digits while it paid consistent cash dividends to its shareholders.
Like any stock, there are pros, cons, and many different alternatives to choose from. However, it is important that everyone carries out their own analysis both on the underlying stock and on the financial instrument in order to have a clear idea about commissions, fees and the risks involved in the trade.
FAQ
How Frequently Does Starbucks Pay Stock Dividends?
Starbucks never paid stock dividends, as their only way of paying dividends since 2010 has been paying cash dividends. On average, the company has paid a dividend yield slightly lower than 2% per year.
Does Starbucks Have A Four-Story Outlet In Chicago?
To honor the location in which the first Starbucks shop opened outside of Seattle in 1987, the company decided to build the world’s largest Starbucks in Chicago. It is called the “Starbucks Reserve Roastery” and it is a four-story high building situated at 646 N Michigan Ave, Chicago, IL.
Does Starbucks Perform Stock Splits?
Yes, Starbucks performed 6 stock splits throughout its life. Each stock split was a 2/1 stock split, meaning that for each individual stock was issued another one. The stock splits occurred in ’93, ’95, ’99, ’01, ’05 and ’15.
StockHax strives to provide unbiased and reliable information on cryptocurrency, finance, trading, and stocks. However, we cannot provide financial advice and urge users to do their own research and due diligence.
Read More