Starbucks (NASDAQ: SBUX) may not appear to be of interest to income investors at first glance. That's partly because it currently yields only 1.6% and also because it is often viewed as a consumer discretionary stock. With fears surrounding a potential restaurant recession building in recent months, many investors may therefore believe that Starbucks' sales, profitability and dividend payments could suffer.
However, in my view Starbucks is a consumer staple rather than a consumer discretionary stock. This means that its earnings and dividends may not be negatively affected by a slowdown in consumer spending. Further, Starbucks has the potential to grow its profitability abroad in markets such as China over the medium term. Alongside the introduction of new products and a high dividend coverage ratio, I believe this means that Starbucks will become one of the very best income stocks around over the medium term.