Over the last several years, Starbucks (NASDAQ:SBUX) has shown immense growth in the market. Its stock has risen to all-time highs and the company has continued to increase returns to its shareholders via dividends and share repurchases. Let's take a look at the recent quarterly report and what the company has been doing to return more value.
The coffee king
Starbucks is home to the world's largest chain of specialty coffee shops. It currently operates 19,767 locations, with the United States being its largest market. The company will exceed 20,000 stores by the conclusion of fiscal 2014 and could easily have over 25,000 by the year 2020.
Earnings to support the moves
Earnings growth is the key to allowing any company to make moves to return capital to its shareholders, and Starbucks has reported record earnings in every quarter this fiscal year. Fourth-quarter results were released on October 30 which looked like this:
|Earnings per Share||$0.63||$0.60|
|Revenue||$3.80 billion||$3.81 billion|
Starbucks' earnings per share grew 37% and revenue rose 12.8% year-over-year, both of which were driven by a 7% rise in global comparable-store sales. The company's operating margin expanded 220 basis points to a record 17.6%, helped by lower commodity costs. Overall, it was a great quarter for Starbucks and management's guidance for fiscal 2014 calls for another record-setting year.
Dividend on the rise
The aforementioned strong earnings report allowed Starbucks to raise its quarterly dividend by 24% to $0.26, resulting in an annual yield of roughly 1.28%. This may not seem like a large dividend by any means, but it has been on the rise ever since the company began paying dividends in 2010. Take a look at this chart:
Currently, Starbucks is on pace to pay a total of $1.04 in dividends in fiscal 2014, representing a 16.9% growth from fiscal 2013. However, I believe it will return a little more than this since it has raised its dividend in the fourth quarter for the last three consecutive years. I think it is safe to assume Starbucks will increase its quarterly dividend to at least $0.30 by the conclusion of 2014.
Bring it back, bring it back
Starbucks has been one of the most active companies in the market when it comes to repurchasing shares. By repurchasing shares, Starbucks reduces the total shares outstanding, which increases earnings per share and makes the remaining shares more valuable. In fiscal 2013, Starbucks repurchased approximately 10.8 million shares of its common stock for roughly $588.1 million. With dividend payments totaling $628.9 million and repurchases of $588.1 million, this means that Starbucks returned over $1.2 billion to its shareholders in the fiscal year. Take a look at the total value returned to shareholders since 2011:
The Foolish bottom line
Starbucks has been on fire in 2013, rising over 48% year-to-date. Its record earnings have been a catalyst for the stock's run and management's outlook for 2014 would support a rally much higher. On top of price appreciation, this company will continue returning additional value to its shareholders via dividends and share repurchases. Starbucks should be bought on any significant pullback provided by the market, as it has the potential to be the hottest stock in 2014.