Even the best dividend growth stocks experience periods of lagging the market. Having plunged 32% year to date, Starbucks (SBUX -0.86%) stock is proof of this point. For context, this is double the Nasdaq Composite's 14.7% fall during that time. 

But rather than focusing on the short term, it's worth asking this: Has the precipitous drop in Starbucks created a buying opportunity for long-term investors? Let's take a look at the stock's fundamentals and valuation to answer this question.

Sales and profits continue to increase

The coffee and cold beverages chain reported a net revenue beat in the fiscal 2022 first quarter (ended Jan. 2). But it missed analysts' expectations for non-GAAP (adjusted) diluted earnings per share (EPS). 

Customer getting coffee at a coffee shop.

Image source: Getty Images.

Starbucks reported $8.05 billion in net revenue during the first quarter, which works out to a 19.3% growth rate over the year-ago period. The company also managed to narrowly top the analyst consensus of $7.95 billion for the quarter, which was the sixth net revenue beat-out of the past 10 quarters.

The driving force behind Starbucks' impressive net revenue growth in the first quarter was the 13% increase in global comparable-store sales.

The company was able to boost its comparable transactions from its existing stores by 10% in the first quarter. Much of this can be attributed to Starbucks' 21% year-over-year growth in its active Rewards program membership to 26.4 million, which is the largest among its peers. This is because customers who are enrolled in rewards programs tend to spend more heavily and frequently than non-rewards program customers. And thanks to price hikes stemming from inflation, Starbucks was able to increase its average ticket by 3%.

The stock recorded $0.72 in non-GAAP EPS in the first quarter, equivalent to an 18% year-over-year growth rate. This came in well short of the average analyst estimate of $0.80. But Starbucks was able to meet or top analysts' predictions in nine out of the 10 quarters preceding the first quarter. This arguably led analysts to expect too much out of the company in the current environment.

Higher-than-expected inflation led to a 30-basis point drop in non-GAAP operating margin to 15.1% in the first quarter. This explains why Starbucks' non-GAAP EPS growth slightly lagged its net revenue growth in the first quarter.

Looking out over the next five years, analysts believe that Starbucks' strong brand and growth opportunities will translate into 11.4% annual earnings growth. For context, this is only a moderate deceleration from the 13.3% growth rate delivered in the past five years. 

Dividend growth should remain exceptional

Starbucks' healthy growth outlook has another benefit. This should propel robust dividend growth for the foreseeable future.

Starbucks' dividend payout ratio was 56.8% in its prior fiscal year. This allows the company to retain the capital necessary to increase its store count and repay debt to drive its non-GAAP EPS higher. Because of Starbucks' manageable dividend payout ratio, I'm confident that the dividend should grow about as fast as earnings.

High-single-digit to low-double-digit annual dividend growth is an attractive proposition for a stock that also offers a market-beating 2.4% dividend yield. 

A great value for its quality

Starbucks' fundamentals paint the picture of a wonderful business. And the recent volatility appears to have made the stock a bargain.

At the current $79 share price, Starbucks is priced at a forward price-to-earnings (P/E) ratio of 21. This is slightly lower than the restaurant industry average forward P/E ratio of 22.9. Starbucks is also trading at a trailing-12-months (TTM) price-to-sales (P/S) ratio of 3.1. This is more than enough of a discount to its 10-year median TTM P/S ratio of 3.8 to compensate for growth deceleration. That's why I believe Starbucks is a buy for growth investors.