Starbucks (NASDAQ: SBUX) went astray in 2000 when its founder and CEO Howard Schultz left the company. Their delivery was not at par with the standards expected from the coffee giant as the quality of their coffee went down, and the communal experience within their stores was lost. The coffee slinger performed unsustainable expansions as well.

 

Redemption proved to be remarkable upon the executive’s return. Starbucks (NASDAQ: SBUX) paved the way for revolutionizing outlets as a comfortable communal ground for all patrons, and this remains one of their major strengths. A reassessment of the company’s goals and strengths was done as Schultz closed down insupportable stores. Since then, stocks of the company have quadrupled and brought great news for existing shareholders then. While this time in the coffee giant’s history is factual, it does little aid to prospective investors who are all eyes on the future of the company.

 

Free cash flow is the most important metric to consider when it comes to assessing a company’s regular dividend payments that is supplementary to their income. Free cash flow is what’s left after capital expenditures are deducted from the total amount of money that the company generates.

 

During the fiscal year of 2013, only 36% of its free cash flow was used to pay out Starbucks (NASDAQ: SBUX)’s dividends. This means that not only there is a great possibility of increased dividend payout, but in the event that times may prove tough for the company, they still have the means to continuously pay their stockholders.

 

While their free cash flow trend went downward from 2010 to 2012, it should be noted that their capital increased by 160% from 2010 to 2013. These capital expenditures include location expansions particularly in the Asia-Pacific. Just to reiterate, free cash flow represents what is left from money brought in less capital expenditures. Putting the figures in perspective shall make one conclude that Starbucks (NASDAQ: SBUX) is well and able to grow in an international scale while having the means to pay for it instead of taking on debt or issuing more stocks. That in itself is something remarkable.

 

A company’s overall health is determined by two critical metrics: comparable store sales (comps) and profit margins. Any firm can increase their revenue through establishing more stores, but the capability to continuously increase sales at preexisting locations equates to a more particularly successful company. The latter is what refers to comps.

 

Miniscule profit margin increases to a company that brings in billions of annual revenues can mean hundreds of millions of dollars. Not only that these growths end up at the bottom line but to the pockets of investors as well.

 

Starbucks (NASDAQ: SBUX)’s comps have been able to withstand, if not increase, in spite of inflation rates. Their ability to grow their profit margin is quite notable as well. The combination of these proves to be good news for investors.

 

The company seeks to grab enormous growth opportunities in Asia – China in particular. They recently acquired Teavana (NYSE:TEA) which they intend to use to capitalize their opportunity to diversify their offerings. Starbucks (NASDAQ: SBUX) is also attempting to become not only a coffee and tea haven, but a place where people can go to for quality food offerings. The idea may appear ridiculous to some, this has been the reaction of many, including investors, when the company claimed that their instant ready-brew coffee (Starbucks Via) will be successful. This segment of the market alone currently brings the company $65 million annual revenue earnings.

 

Considering the fact that the company’s dividend only yields 1.4% for a stock price that trades for 29 times non-generally accepted accounting principles earnings, we can conclude that Starbucks (NASDAQ: SBUX) is a premier company that is most likely to significantly increase its payout once it their products maximize the state of the market.

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