This Dividend Growth Stock Appears 18% Undervalued Right Now

Welcome back to the Valuation Zone, where we hunt for well-valued dividend growth stocks hiding in the forest of stocks that sell on one market or another.

This month’s stock is Starbucks (SBUX), the ubiquitous coffee seller. We last visited Starbucks almost a year ago, when it was our Dividend Growth Stock of the Month for September, 2017.
Since that article, lots has happened at Starbucks.

  1. • It increased its dividend 20% last November.
  2. • Its yield has hopped up from 1.8% to 3.0%.
  3. • It was the site of the now-infamous incident in a Philadelphia store where two black men had the police called on them as they were waiting for a friend to arrive for a meeting. Starbucks later closed down all its American stores for an afternoon of diversity training.
  4. • Its former CEO, Howard Shultz, stepped down from the board.
  5. • Its CFO, Scott Maw, unexpectedly announced his retirement to take effect in November.
  6. • First-quarter results and guidance were disappointing.

For these reasons and others, Starbuck’s price has fallen to a 3+ year low. You can buy it now for the same price as in mid-2015. However, since that point in 2015, Starbuck’s dividend has increased 4 times for a total increase of 125%.

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