This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Starbucks' Profit Aroma Is Invigorating

NEW YORK ( TheStreet) -- Twenty-six percent. That's how much higher shares of Starbucks (SBUX - Get Report) are after my last article about the company, "Starbucks, the Doorway to the World," was published.

Expect Starbucks to continue serving fresh mugs of growth, profits and increasing dividends. In the last three years, the dividend payments have more than doubled. Based on the same period's payout ratios and profit growth, another increase within the next 12 months should not come as a surprise.

That's exciting news for shareholders, but more importantly, it's not too late to ride the java profit train. The key is management. During the Great Recession, Starbucks was exceedingly quick to close locations that weren't performing, thus preserving cash and shareholder value. Starbucks' management is battle-tested during growth and contraction periods. That's the safety net you want when buying 52-week highs. Shares of Starbucks closed Tuesday at $67.10.

As market conditions improved, management changed from a defensive posture back to growth and expansion faster than Jim Cramer can push the "buy buy buy" button on "Mad Money."

The current window of opportunity comes from Starbucks not reporting earnings until July 25. You can almost smell the profits brewing already, and the latest string of new 52-week-high closes clearly demonstrates the market approves displaying calories on the menu. Does anyone seriously believe hungry shoppers are not going to buy a food item because they now know the calorie count? Of course, they are going to buy. They may change their purchasing for a week or two, but not permanently.

Consumer decisions are based on emotion and justified with logic, not the other way around. Hunger is a powerful emotion, and digits on paper have little impact on a sweet tooth. I think the positive goodwill gained from increased transparency offsets changes in consumer behavior.

SBUX Revenue Quarterly Chart SBUX Revenue Quarterly data by YCharts

Currently, analysts are anticipating about 53 cents a share in profits from the earnings report. The revenue and profit trend justify the market's bull trend reaction. You want to view each dip in price as a buying opportunity. Stocks don't travel straight up or down, and you can use the market volatility to your advantage.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
SBUX $55.40 2.70%
AAPL $111.88 2.00%
FB $89.35 2.50%
GOOG $633.89 0.84%
TSLA $238.91 6.30%

Markets

Chart of I:DJI
DOW 16,654.77 +369.26 2.27%
S&P 500 1,987.66 +47.15 2.43%
NASDAQ 4,812.7080 +115.1720 2.45%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs