Why Starbucks Corporation (SBUX) Stock Is Right for Income Hunters

Double-digit increases to the dividend on SBUX stock are worthy of your attention

Who doesn’t like a juicy dividend yield between 3% and 4%? I know I sure do. And while a number of companies — like The Coca-Cola Co (NYSE:KO) and Procter & Gamble (NYSE:PG) — sport such a yield, the valuations surely don’t appear to be a bargain. I’m not here to argue the merits of these stocks though. Instead, I’m more excited by a trio like Visa Inc (NYSE:V), MasterCard Inc (NYSE:MA) and Starbucks Corporation (NASDAQ:SBUX).

Despite mediocre earnings growth, Coca-Cola and PG trade with respective forward price-to-earnings ratios of 21 and 22. Similarly, V, MA and SBUX stock trade with forward P/E ratios of 23, 22 and 23, respectively. However, they are often times lauded as being highly overvalued despite their strong brands and growth.

Specifically with Starbucks, a number of investors now claim its growth run is over. Why? Because its recent same-store sales grew less than 5% in the U.S. While 23 times expected earnings is not cheap, I don’t agree that Starbucks stock is overvalued given its growth, brand and dividend.

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