The coffee titan likes to return cash to shareholders through dividends and stock buybacks.
Like many of its peers, Starbucks (SBUX 0.47%) allocates some of its excess cash each year toward buying back its own stock. The company uses that spending as a way to return cash to shareholders. That’s because repurchasing your stock, to the extent that it reduces the outstanding share count, leaves existing shareholders with a larger relative ownership of the company. Earnings per share tend to expand more quickly, too, potentially lifting the share price.
Let’s look at how much the coffee giant has spent on this capital return channel in the past year.
Spending on stock buybacks
Starbucks has spent just under $2 billion on its own stock in the past year. Its spending has been highly variable, though. The chain spent $1 billion in the fiscal 2023 year that ran through late September 2023, for example. Spending on buybacks then jumped to $1.3 billion in the fiscal first quarter that ended in late December. This spending has been enough to push Starbucks’ outstanding share count lower, meaning it more than offset any new stock issuances in the past year.
SBUX Stock Buybacks (TTM) data by YCharts
Management has signaled a desire to keep spending on stock buybacks, but only after paying Starbucks’ dividend and making core investments into growth initiatives. The $1 billion management spent in fiscal 2023 was below the $2.4 billion that it allocated toward dividend payments, for example.
Looking forward
The chain’s spending in the coming year is impossible to predict and will depend on things like its cash flow and growth rate. On the downside, Starbucks recently reported sluggish sales trends in the U.S. and in China. Yet its profitability has been rising, giving management more ammunition it can direct toward stock buybacks.