Starbucks Corporation (NASDAQ:SBUX) is a household name in coffee and has a track record of growing its dividend. But for investors, there’s more to the story than just brand loyalty. The big question is whether Starbucks can get its earnings growing again fast enough to support its current valuation, while still rewarding shareholders along the way. In addition, the company competes with other beverage plays that offer higher dividends and are trading at low multiples. Check here.
Starbucks just bumped its quarterly dividend from $0.62 to $0.63 per share, marking the 16th year in a row it’s raised its dividend. With the new annual payout at $2.52, the yield comes out to about 2.7% based on a share price of $92.29. Since 2010, the company has grown its dividend at an impressive average rate of 17% per year.
The challenge now is keeping that dividend growth going as earnings bounce back. In the third quarter of 2026, Starbucks brought in $9.3 billion in revenue, which was 1% lower than a year earlier. The decline was partly due to changes in its China business. On the bright side, comparable-store sales jumped 7.9%, helped by more customers and higher average spending. GAAP earnings per share rose 86% to $0.91, and operating margin widened to 10.5%. These numbers show Starbucks is seeing better demand and profitability, even though costs from restructuring and higher wages are still a headwind.
Management expects adjusted earnings per share of $2.55 to $2.65 for fiscal 2026. At the middle of that range, Starbucks would be paying out about 97% of its expected earnings as dividends. This doesn’t leave much room for bigger dividend increases unless profits pick up.
Forward P/E Tests the Recovery Story
Starbucks Corporation trades at a forward P/E ratio of 30.86, while the trailing P/E is 54.42. That forward number means the earnings yield is just 3.24%. The trailing P/E looks so high because recent profits were still recovering and lower than what investors expect going forward.
The current forward valuation is still expensive compared to Starbucks’ own history. For example, Yahoo Finance shows the forward P/E was 34.72 in June 2026, 38.76 in March, and 34.84 in December 2025. While today’s number has come down, it still assumes a solid recovery in earnings.
For comparison, McDonald’s trades at a forward P/E of 17.06. Starbucks’ higher multiple may make sense if the company can boost margins and deliver steady earnings growth, but the gap is still pretty wide. Read the full comparison here.
Cash Flow and Risk-Adjusted Returns
Starbucks has a powerful brand, a global network of stores, and loyal customers. These are the factors that support its ability to pay dividends. But higher labor costs, swings in coffee prices, restructuring charges, and other execution risks mean it’s crucial for cash flow to keep improving. The recent earnings boost is a good sign, but it doesn’t take all the pressure off dividend coverage just yet. Investors looking for other beverage-sector options can check our compilation of dividend stocks.
Comparing income options, the 10-year U.S. Treasury paid about 5.09% in mid-October 2026. That’s higher than Starbucks’ 2.7% dividend yield and its 3.24% forward earnings yield. So, Starbucks investors are taking on more business and market risk for a lower yield today, hoping future earnings growth and dividend hikes will make up the difference.
Conclusion
Starbucks has a strong track record of raising its dividend, but the current payout doesn’t leave much room for mistakes while earnings are still catching up. With a forward P/E near 31, investors are paying up for expected improvements in profit. Until Starbucks can show stronger cash flow, the dividend looks best as part of a long-term recovery story, rather than as a source of high income right now.
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This article is originally published at Insider Monkey.
