Despite its lower-than-average yield, Starbucks could be a big dividend payer in the future.
The dividend growth formula (something I just made up) is
pretty simple. There are only two parts: current dividend yield and potential
dividend growth. The best stocks score high on both, but those are few and far
between. More often, investors have to make compromises, and in those cases I
prefer to look at stocks with relatively low current yields but massive potential
for dividend growth.
While the S&P 500 currently offers an average yield
around 2.1%, it's often worthwhile to look at stocks yielding well below that
average due to their growth potential. Starbucks (NASDAQ:SBUX) currently yields
just 1.4%, but in five years its dividends could easily double, producing an
average annual yield on your original investment above today's current market
average.
Here's a look at why Starbucks makes sense in a dividend
growth portfolio…
Source: The Motley Fool