On Oct. 22, Starbucks (NASDAQ: SBUX) announced its 14th consecutive annual dividend increase, boosting the quarterly payout by 7% to $0.61 per share or $2.44 per share per year. Starbucks started as a growth stock but has since transformed into a highly reliable dividend stock with a forward yield of 2.6%. The dividend has become a core part of Starbucks' investment thesis. Like clockwork, investors have been able to count on annual raises every September or October.
Here's why Starbucks shares were actually down the morning of Oct. 23, and whether the dividend stock is worth buying now.
Starbucks investors have been on a roller coaster in 2024. The stock plummeted in May after reporting disappointing second-quarter results. The third-quarter results weren't much better, but at least they indicated Starbucks may have begun to correct course.
On Aug. 9, reports surfaced that activist investor Starboard Value had taken a stake in the company, a sign that a shake-up could be in order. Then, the big news came on Aug. 13 when Starbucks announced it had poached the highly esteemed Chipotle Mexican Grill CEO, Brian Niccol, to become the new chairman and CEO of Starbucks. The stock climbed a staggering 25% on Aug. 13, its best single-session performance in history.
On Sept. 10, Niccol wrote a letter titled Back to Starbucks, which discussed the power of the brand, a return to the coffeehouse style that made it beloved in the first place, and a renewed emphasis on quality ingredients and passionate baristas.
The stock price had mostly retained its Aug. 13 gains, a sign of optimism that investors were looking forward to the fourth-quarter and full fiscal 2024 report on Oct. 30, rather than dreading it. That is, until Starbucks pre-announced its quarterly results on Oct. 22.
Companies will sometimes choose to announce preliminary results when they want to cushion the blow from a bad earnings report or to simply draw attention to the future rather than the past. That certainly seems to be what Starbucks is doing, given its terrible results.
The preliminary results showed a 7% global comparable-store sales (comps) decline; a 3% decline in consolidated net revenue; and a drop of $0.80 in earnings per share (EPS), representing a decline of 25% under generally accepted accounting principles (GAAP) and 24% on an adjusted, or non-GAAP, basis.
For the full fiscal year, comps were down 2%; consolidated net revenue was up 1%; and both GAAP and adjusted EPS were $3.31, down 8% on a GAAP basis.