We recently compiled a list of the 8 Best American Dividend Stocks To Buy Right Now. In this article, we are going to take a look at where Starbucks Corporation (NASDAQ:SBUX) stands against the other American dividend stocks.
The US economy expanded by 2.8% in the third quarter of 2024, as reported in the Advance GDP release from the U.S. Bureau of Economic Analysis. This marked the ninth straight quarter of growth in real GDP. While the third-quarter increase was robust, it slightly lagged behind the 3% growth recorded in the second quarter of 2024. Economists polled by Dow Jones had anticipated a 3.1% rise.
Regardless of market conditions, investors frequently seek to minimize risk in their portfolios, and investing in dividend stocks is a reliable approach to achieve this. A report by S&P Dow Jones Indices highlighted the growing significance of dividends as a source of personal income. Over time, dividend income has steadily risen, increasing from 2.68% in the fourth quarter of 1980 to 7.88% in the second quarter of 2024. In contrast, interest income has seen a decline, dropping from 14.58% to 7.61% during the same period.
Also read: 8 Best Dividend Kings To Invest In For Safe Dividend Growth
The Dividend Aristocrat Index, which tracks the performance of companies with 25 consecutive years of dividend growth, has surged by over 10% since the start of 2024, underperforming the market. Although dividend stocks may not have been hitting it out of the park this year, US companies have remained dedicated to rewarding shareholders by consistently paying dividends. According to a report by S&P Dow Jones, for the 12-month period ending in September 2024, US common dividend increases totaled $74.7 billion, marking a 16.9% rise from the $63.9 billion recorded in the same period a year earlier, ending in September 2023. The report also mentioned that in the third quarter of 2024, there were 480 dividend increases reported, marking a 7.1% rise compared to the 448 increases in the same period in 2023. The total value of these dividend hikes amounted to $14.1 billion for the quarter.
WisdomTree offers an interesting perspective on global dividends in its report. According to their findings, the global equity market currently distributes around $1.6 trillion in dividends, an increase from approximately $1.5 trillion last year. Notably, 55% of these dividends come from outside the US, which is about 15% more than the non-US share in market cap-weighted indexes. On the other hand, US companies account for 44% of global dividends, which is considerably less than their 63% share of global market capitalization. This suggests that non-US markets are more heavily weighted in dividend-focused indexes, while US exposure is relatively lower. For instance, European countries make up about a quarter of global dividend payments, which is 10% more than their share of the global market cap.
That said, the start of dividend payments by several major US tech companies contributed an additional 1.1 percentage points to the global growth rate in Q2, as reported by Janus Henderson’s Global Dividend Index report. The report also mentioned that the contribution from these new dividend payers will persist throughout the remainder of the year, ensuring that US payout growth remains ahead of the global average. In view of this, let’s take a look at some of the best American dividend stocks.
Our Methodology:
We created this list by scanning Insider Monkey’s Q3 2024 database for US companies that have consistently increased their dividends for at least 10 years and are traded on American stock exchanges. Then, we chose stocks with dividend yields above 2% as of December 10. Finally, we selected the top 8 companies with the most hedge fund investors in Q3 2024 from the refined dataset.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
A barista pouring freshly brewed coffee from an espresso machine to a cup in a bustling cafe.
Starbucks Corporation (NASDAQ:SBUX)
Number of Hedge Fund Holders: 76
Starbucks Corporation (NASDAQ:SBUX) is a Washington-based multinational chain of coffeehouses that specializes in a wide range of coffee beverages. The economy, and especially consumer spending, has shown resilience over the past year despite ongoing uncertainty. However, Starbucks has not experienced similar success. The highly competitive and fragmented nature of the retail coffee market poses challenges for the company. In the US, the top five coffee chains collectively hold less than half the market, leaving customers with plenty of alternatives to large chains. With no switching costs, customers can easily choose other options, leaving Starbucks little margin for error—an issue that seems to be affecting its performance. In the past year, the stock has shown a modest return of just 0.18%.
Starbucks Corporation (NASDAQ:SBUX) showed mixed earnings in fiscal Q4 2024. The company posted revenue of $9.07 billion, which fell by 3.2% from the same period last year. That said, the cash position remained stable, generating $6 billion in operating cash flow. During the quarter, the company added 722 net new stores, increasing its total locations to 40,199. Of these, 52% are company-operated, while 48% operate under licensing agreements.
ClearBridge Investments appreciated Starbucks Corporation (NASDAQ:SBUX) on its strong business model in its Q3 2024 investor letter. Here is what the firm said:
“Similarly, we took advantage of a business reset at Starbucks Corporation (NASDAQ:SBUX) in the third quarter to initiate a position in the global coffee retailer. A confluence of factors, including degraded store-level operations and long consumer wait times, consumer fatigue with high prices and weakening engagement among occasional Starbucks customers has led to declining U.S. same-store sales growth. While the path ahead will likely require reinvestment back into the business, there are many merits to Starbucks’ business including its strong brand name and category leading market position. In response to recent challenges, Starbucks has appointed change-agent CEO Brian Niccol, who we know from the Strategy’s ownership of Chipotle Mexican Grill during its turnaround. Niccol has a successful track record of investing in product innovation and fixing execution issues, which we believe are the primary challenges facing Starbucks today. Starbucks represents the kind of successful playbook we have executed on historically – focusing on high-quality businesses and brands while being disciplined around the entry point into investments with attractive risk-reward opportunities.”
Starbucks Corporation (NASDAQ:SBUX), one of the best dividend stocks, has been growing its dividends consistently for the past 14 years. The company’s quarterly dividend currently comes in at $0.61 per share for a dividend yield of 2.48%, as of December 10.
As of the close of Q3 2024, 76 hedge funds held stakes in Starbucks Corporation (NASDAQ:SBUX), growing from 70 in the previous quarter. These stakes have a consolidated value of more than $3.25 billion.
Overall SBUX ranks 5th on our list of the best American dividend stocks to buy right now. While we acknowledge the potential for SBUX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SBUX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
