Starbucks to pay 10-cents-per-share cash dividend to shareholders

Starbucks says its dividend is its first paid in cash to investors. It will be paid on April 23 to shareholders who own stock April 7. Read "Starbucks to pay its first dividend" || Press release
> Watch today's Starbucks annual meeting (it starts at 1 p.m. ET)

Comments

[me myself and I]

There you can see who the real focus for the company is. It's not the customer, or the partners (as Howard said earlier this year), it's the shareholder.
I would much rather see them investing the little money they have back into the company instead of making history by paying the first ever dividend.

[SBUX Alum Bill]

Payment of dividends at this stage is truly a slap in the face to current "partners" and those who were let go. Howie, in escence, is paying a bonus to shareholders (including himself) at the same time that he has the severely limited the bonuses and raises of his "partners" (excluding, of course, the $1,000,000 bonus that he awarded to himself).

[Barista Ben]

on the other hand this could start making the stock go up and increase the value of the stock options the company gave me at $8 a share. While the amount, for myself, isn't anything amazing it is still a lot of money for me now.

Hmm. Only because my current job doesn't pay all that much, though! Oh irony.

[Herman M.]

And I just sold my shares and exercised my options as part of my parting gifts. Oh well.

The slash your way to a better bottom line method will catch up sooner or later. Glad I'll miss out on that particular fire sale.

[SBUX Alum Bill]

@ Barista Ben:

The dividend will actually reduce the value of your stock options. The value of your options will go down after the April 7 (the date of record for the dividend) by an amount equal to the dividend, since the company is, in effect, distributing part of its assets. The same thing will happen in the future whenever a dividend is distributed.

[Barista Ben]

i believe the idea is to entice new investors into purchasing the stock as perhaps a long term holding stock that might pay out consistent dividends. The buy-back should also help the price go up rather than down.

unfortunately dividend stocks don't usually mean stocks that are going up - rather they stay somewhat stagnant and the value is in the dividends. That part would probably hurt my stock options, in the long run.

[SBUX Alum Bill]

@ Barista Ben:

You got it exactly right. The buy-back defends the value of your options by reducing the number of shares that will be in circulation when you finally exercise your options; the dividend will dissipate the value of your options because it takes money away from growth activities & gives it to CURRENT shareholders (rather than option holders).

[Aaron]

I don't think this necessarily will decrease the value of stock options compared to if they had not paid out the dividend, when you look at it realistically. Yes, when Starbucks was reinvesting its profits into growth, rather than paying out dividends, that meant more growth in stock value (except when it started tanking), which was great for partners in terms of their stock option value. The problem with doing that was a lot of that money was invested in growth irresponsibly. It would be great for our stock options if Starbucks could make some wise investments toward its overall financial growth, but I don't think that's possible, and Starbucks seems to agree, hence the paying out of a dividend, rather than reinvesting those profits.

However, despite that I do think this is the right move at this point, it doesn't change the fact that for so long Starbucks touted its stock options and growth to partners as perks for working at bux, giving a misleading view of what Starbucks "total pay" was actually worth. The vast majority of the stock options that I actually have vested are worth nothing, since they vest very slowly, so most of them have a very high purchase price from back in the day, while the ones that are actually worth something are only partially vested or not at all vested yet...

[Aaron]

One other quick point in summary: This means that Starbucks no longer thinks it has much room to grow any more, at least for now. This is not very surprising, coming out of all the cuts that have been made, but it is a profound shift in strategy from before the stock tanked, and there has not necessarily been any strong signs that Starbucks definitely would be taking this strategy rather than going for more growth until now. The importance of this news for the company can hardly be overstated.

[bayareabux]

Our very own Melody is famous again!! Taking on the Q & A! :)

[SBUX Alum Bill]

@ Aaron:

You're right - the company has reached a point where it feels that it cannot effectively invest funds internally & get a good rate of return. If I was an employee with stock options, I would much prefer that the company use the excess cash to buy-back stock, rather than pay it out in cash dividends to existing stockholders. Option-holders benefit from the reduced number of shares in circulation from a stock buy-back, but they get no benefit for cash that is paid out in dividends to existing shareholders. Existing partners (who hold options) should be encouraged by the announced buy-back of shares, but not by the announcement of cash dividends.

[Melody]

@bayareabux - I didn't feel that my question got answered at all, and mostly the Q & A session of the meeting left me feeling empty.

I asked about 'what lessons have been learned in the transformation of Starbucks rewards, and what might we see as improvements to MyStarbucksRewards in the future' and at no point did Annie Young-Scrivner talk about the challenges associated rapid-fire loyalty rewards changes that baristas are expected to keep up with, nor did she discuss any of the disappointment for those who did like the previous version of the Gold Card.

There was nothing in her answer that even addressed my question about 'what improvements might we see in the future for MyStarbucksRewards'. The answer was the same canned answer to be found many places online and did not give a heartfelt genuine attempt to answer the question. She simply stated the canned reply that customers want free drinks, and not to pay $25. That may be true (though I genuinely think many did like the previous Gold card) but it still doesn't respond to what Starbucks as a company learned from the rapidly changing programs, or the perhaps the complexities of having two overlapping programs still to this day (since for many their black card is not expired, or another complexity is that any customer may continue to use the black card for MSR, and as a result many baristas will see the black card and assume that customer is NOT part of MyStarbucksRewards, but rather gets a 10 percent discount). There are many other talking points about MSR, but none of those doors were opened during this Q & A session.

When we get to 2011, things will get a little easier because NO card will have a 10 percent discount anymore, and so baristas will only have to worry about one reward program, which at that point will be much more established, but again this might have been one of the talking points today, but was not.

That part of the meeting represented disappointment. On another topic, I was surprised that there were 3 people who all asked gun questions. I thought for sure there would be one, but I was surprised at three.

[bayareabux]

I concur on the extremely canned nature of the response and I'm disappointed in the dodge Howard made in so quickly handing off the question. We can admit mistakes made two years ago, but mistakes made last fall are off the table, eh?

I think this issue represents the death of "My Starbucks Idea" -- the site is flooded with posts, but Young-Scrivener still has absolutely no clue how badly the company handled the transition.

[harmaa]

Why couldn't they give all the partners a 10 cent raise instead?

I have seen nothing to indicate that Howard is keeping any of the promises he made at the end of the partner survey.

[Georgia Latte]

I'm only going to say this once and not comment any further on it, but raises for partners in the coming year is a VERY definite possiblity....

[SeattleSlurp]

I wish they would give raises to the low paid hourly people at the Support Center - many of which make less that the ASM's in stores.

[cash for gold]

Gold has been loved from ancient times up to the modern era. Back in the day, gold was used as a form of currency. Those who possessed many gold coins were considered wealthy and ranked high in society.