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Starbucks Stock: Aggressive Growth Strategy Will Enhance Returns

starbucks stock

Starbucks (NASDAQ: SBUX) stock price had generated big gains for investors in fiscal 2019. The company’s aggressive growth strategy is likely to help in extending the share price momentum. Moreover, the company is in a strong position to increase cash returns for shareholders. It had recently raised the quarterly dividend by 14% to $0.41 per share.

Starbucks stock is the darling of dividend and defensive investors. This is because of its sustainable growth potential.  Its share price grew 40% in fiscal 2019; the company also returned $12 billion to shareholders through dividends and share buybacks.

SBUX Starbucks Corporation daily Stock Chart

Cash Returns are Safe

The company appears in a position to increase cash returns in fiscal 2020. This is due to its aggressive growth strategy. The company had generated 5% global comparable sales growth in the final quarter of fiscal 2019. Its consolidated revenue rose 7% year over year in the latest quarter.

The CEO said, “Our U.S. business delivered 6% comparable-store sales growth in the fourth quarter, while China grew comparable-store sales by 5% and total transactions by 13%. Our strong performance throughout fiscal 2019 gives us confidence in a robust operating outlook for fiscal 2020.”

The company has been aggressively working on increasing the store count. It reported global net store growth of 7% compared to the previous year, driven by 17% net store growth in China.

Starbucks Stock: Aggressive Growth...

On top, the company is showing the potential of returning revenue growth into big profits. SBUX’s non-GAAP earnings per share jumped 17% to $2.83 in 2019 from the past year.

Starbucks Stock Is Presenting an Entry Point

Starbucks Stock: Aggressive Growth...

Although Starbucks stock bounced significantly in fiscal 2019, the market fundamentals and valuations are showing further upside. SBUX shares are trading around $88 at present, down from a 52-weeks high of $100 a share. SBUX shares are trading around 29 times to earnings. The company’s robust financial growth is likely to support the upside momentum. Starbucks looks like a safe play for dividend investors.

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Based in Saudi Arabia, Siraj has a strong understanding of and passion for accounting and finance. He has worked for international clients for many years on several projects related to the stock market, equity research and other business, accounting and finance related projects. Siraj is a published financial analyst on the world's leading websites including SeekingAlpha, TheStreet, MSN, and others.