3 Reasons Starbucks Will Keep Winning

Shares of Starbucks (NASDAQ: SBUX  ) are currently trading near an all-time high of around $77 apiece. Their impressive run makes it easy to write off the stock as being too pricey today. However, shares still trade at a bargain to their ultimate potential. Here are three reasons that Starbucks will continue satisfying shareholders for years to come.

Strong dividend growth
The world's largest coffee retailer has increased its dividend by 24% in the past year, once again proving it knows how to put shareholders first. Starbucks now pays a quarterly dividend of $0.21 per share, with a dividend yield of 1.09%. To be clear, a one percent yield isn't great. But we're not looking for sky-high yields. Rather, it's growth that we're after. Fool writer Daniel Sparks estimates that Starbucks will grow its dividend to about $2.08 in the next 10 years, with a yield around 3.3%.  

Moreover, Starbucks' payout ratio of 38% tells us it shouldn't have any problems continuing to hike its dividend in the future. It also means that Starbucks will have enough cash left over to reinvest in growing its business. That's reassuring considering rival coffee stop Dunkin' Brands (NASDAQ: DNKN  ) pays out more than half of its operating cash flow in dividends. While Dunkin's payout ratio of 58% isn't terrible, Starbucks' is more reliable. In the first quarter of fiscal 2013, Dunkin' Brands boosted its quarterly dividend to $0.19 per share, up from $0.15 in 2012 .

Last year, Starbucks returned more than $1 billion to shareholders through dividends and share buybacks -- given management's execution skills and growth prospects to be outlined, it's likely that this trend will continue. Ultimately, Starbucks' ability to generate superior cash flow will fuel its shareholder payouts for years to come.

Opportunities in emerging markets
Not only is Starbucks growing its dividend, but it's also expanding into new markets. There's a lot of growth waiting for Starbucks in emerging markets, particularly in China and India. The company currently has 1,000 locations up and running throughout China and Japan. However, in China specifically, it plans to open an additional 1,500 stores by 2015.

When it comes to the Chinese market, Starbucks has already proved it can succeed where others have failed. Now it is a matter of unlocking growth in the region. As it stands, China is on pace to become Starbucks second-largest market outside of the United States. And that says a lot considering Starbucks currently operates more than 19,000 stores, across 62 countries.

Last year, Starbucks opened its doors in India, which marked its most successful launch in the company's 42-year history, according to CEO Howard Schultz. With Starbucks firmly focused on China and India, the company is now on track to have 20,000 stores on six continents as soon as next year.

Transforming into a global consumer brand
Nevertheless, Starbucks is much more than an international coffee chain these days. In fact, three strategic acquisitions are helping Starbucks conquer new product categories including food, juice, and tea. In 2011, the company paid $30 million to buy Evolution Fresh, a premium juice maker. Today, it's leveraging that purchase to bring healthy snack bars and juices into its stores.

The Evolution brand could also become a powerful growth engine for Starbucks in the consumer packaged goods space. Whole Foods stores, for example, now carry Starbucks' Evolution Fresh juices in 12 flavors, as well as Evolution Harvest snack bars. Starbucks and Whole Foods worked out the deal in August. Better still, Starbucks plans to have its Evolution products in 8,000 U.S. cafes and grocery stores by year-end.

Throw in last year's acquisition of bakery chain La Boulange, along with Starbucks' more recent purchase of Teavana, and you have yourself a burgeoning world-class consumer packaged goods company. This should fuel revenue growth as Starbucks continues to nurture these businesses into prominent brands.

Starbucks' stock has tripled in value over the last three years, and it should continue on that trajectory going forward, thanks to the catalysts outlined above. From solid dividend growth and international expansion to a budding portfolio of profitable brands, Starbucks' growth story is far from over.

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