Starbucks Corp (NASDAQ:SBUX) shares have extended the downtrend despite its strategy of offering higher returns to investors.
The company recently announced to increase its quarterly dividend by 20% to $0.36 a share, yielding around 2.5%. The latest dividend increase is a part of its new three-point business strategy. Starbucks is planning to return $20 billion, instead of the originally advised $15 billion, to investors in the next two years. This means that the company is planning to make double-digit raises in its dividend between 2018 and 2020.
Starbucks Corp: New Business Strategy for Potential Growth
The company has outlined a new business strategy to generate sustainable growth in its financial numbers and cash returns. The business plan is based on three points:
- The company is planning to expand its penetration in high growth Chinese and U.S. Markets.
- Starbucks announced that they are looking to expand the global reach of the brand through the Global Coffee Alliance.
- Focus on increasing shareholder returns.
Starbucks Corp CEO Kevin Johnson said, “We must move faster to address the more rapidly changing preferences and needs of our customers. Over the past year, we have taken several actions to streamline the company, positioning us to increase our innovation agility as an organization and enhance focus on our core value.”
>> Starbucks to Close 150 Stores in 2019
But Analysts See Limited Upside for Starbucks Stock
The market analysts, however, are seeing limited upside potential for its share price in the days to come. Its shares are down 15% in the last twelve months to $50 a share at present. Morgan Stanley has reduced its rating to an Equal-weight based on its declining revenue growth from Chinese and U.S. markets. Telsey Advisors Group has lowered its rating to Market Perform.
Oppenheimer analyst Brian Bittner, however, is positive about the new Starbucks Corp business strategy. He says “We acknowledge the model is underperforming the +3-5% long-term SSS target, but do see interesting drivers as new digital initiatives revitalize non-loyalty customers into F19/ F20.“
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