SBUX recently lowered it’s Q3 ’18 growth outlook and a series of downgrades ensued resulting in the stock dropping about 5%. It’s sitting near it’s 52-week low. The trade wars may also be weighing on shares. I decided to pick up some shares on weakness. They do outline their piorities if you read that press release and this one stands out:
“Sharpening the focus on increasing shareholder returns.”
Starbuck’s is an iconic brand recognized around the world. I believe there’s a lot of growth for this company internationally, they are really taking off now in China. Starbuck’s stock hasn’t done much the last 5 years though. The earnings has increased while the stock price has stayed range-bound. What this has done is contracted the P/E ratio turning SBUX more into a value proposition than growth.
SBUX just announced a 20% increase to its dividend on 06/19 from .30 to .36 per share. This is a huge increase. EPS for 2017 was 2.06 and 2018 is projected to be 2.47. At a price of $54/share this is around a forward P/E of 22. Not super cheap but a nice price if you are still expecting growth which I am. 2021 EPS projections are 3.56. If the price stayed at $54 that would be a P/E of 15. I don’t believe we’ll see SBUX at a P/E that low. So either the EPS projections will not happen or the price of the stock goes up accordingly with earnings growth.
SBUX has had 9 straight years of dividend raises, the latest a huge 20%. In fact the last few have been at least 20%. I fully expect double digital raises for the next few years unless there’s another recession.
SBUX is also currently yielding 2.5%. This is a nice yield for a company with a lot of growth potential.
Morningstar assigns them a 4 Star rating with a fair value of $68/share.
My recent purchase:
I Bought 40 of shares of SBUX at 54.46/share.
These 40 shares add 57.60 to my yearly dividend income.
Forward 12-month Dividends:
My forward 12-month Dividends are now up to $15,902.
SBUX is now 2.6% of my current portfolio. I have no issue bringing them up to a 5% weighting but I will be looking for further weakness to reduce my cost basis more. I currently own 205 shares.
I wasn’t planning on making any more purchases until next month but I couldn’t resist.
In Recent News:
If you missed my recent news, this is a repeat from my last Recent Buy article where I purchased more shares of JNJ.
I’m currently working for my old employer from home as a recruiter. It’s nice to be home and be able to spend extra time with the family. So far this is working out well. We’ve since moved into a new home last fall in a different town since we closed the restaurant and I finally feel like I’m getting caught up on things where I have a few minutes to write now. I plan to at least start doing quarterly dividend reviews which I’ll put out in early July. I also hope to post more often about recent trades. I do always keep My Portfolio updated.
The restaurant has been leased to a new tenant and in fact all of my rentals are fully leased now. I’m up to 4 rentals including the commercial property that has two tenants.
My passive income is finally back on track and moving up nicely. I hit the $1,000/mo in dividends mark that I mentioned back in March. I have made some nice progress over the last year. One way I’ve been able to drive up my dividends is through options, you can see all of my recent options trades here.
I also recently signed up for a new brokerage account ,Robinhood. If you haven’t check them out yet I’d recommend looking at my Robinhood Review. You can still get a free share of stock as of this writing by just signing up.
So what have you been purchasing? I hope everyone is well on their way to achieving their goals this year!