In the video below, Motley Fool CEO Tom Gardner sits down with Starbucks (SBUX +1.67%) CFO Troy Alstead during a recent visit to Starbucks headquarters in Seattle. In this portion of the video, they discuss whether Starbucks would be open to taking on more debt considering the low-interest-rate environment. Alstead says that the company is focused on using its cash flow to continue to raise its dividend, with a payout ratio of 35% to 40%. Alstead says he is committed to elevating that payout ratio, and that the company has considered taking on balance sheet debt in the future.
A full transcript follows the video.
Tom Gardner: Why not, in this low-interest-rate environment, with your pristine balance sheet, more aggressively use leverage to expand more rapidly?
Troy Alstead: The answer to that is we might. We look closely at that. We haven't needed funding. We have such a strength of cash flow in our business that we have committed to our dividend and committed to raising our dividend year after year, which we've been doing. We initiated that dividend at a 35[%] to 40% payout ratio a couple of years ago. I am committed over time, not immediately, but when we can, to elevating that ratio, to really growing that dividend as a way to return cash. We're active in share repurchases. We believe that's valuable to shareholders as one way to provide that distribution back.
And we're also heavily focused on: What's the right balance sheet? Should we optimize it? So we are always looking at bringing some balance sheet debt on; at some point in time we may well do that.
