Starbucks Corporation's (NASDAQ:SBUX) periodic dividend will be increasing on the 29th of November to $0.61, with investors receiving 7.0% more than last year's $0.57. Based on this payment, the dividend yield for the company will be 2.3%, which is fairly typical for the industry.

While the dividend yield is important for income investors, it is also important to consider any large share price moves, as this will generally outweigh any gains from distributions. Investors will be pleased to see that Starbucks' stock price has increased by 31% in the last 3 months, which is good for shareholders and can also explain a decrease in the dividend yield.

See our latest analysis for Starbucks

Starbucks' Payment Could Potentially Have Solid Earnings Coverage

Unless the payments are sustainable, the dividend yield doesn't mean too much. Based on the last payment, Starbucks was quite comfortably earning enough to cover the dividend. This indicates that quite a large proportion of earnings is being invested back into the business.

Looking forward, earnings per share is forecast to rise by 30.8% over the next year. If the dividend continues on this path, the payout ratio could be 56% by next year, which we think can be pretty sustainable going forward.

Starbucks Has A Solid Track Record

The company has a sustained record of paying dividends with very little fluctuation. Since 2014, the dividend has gone from $0.52 total annually to $2.28. This implies that the company grew its distributions at a yearly rate of about 16% over that duration. It is good to see that there has been strong dividend growth, and that there haven't been any cuts for a long time.

Starbucks May Find It Hard To Grow The Dividend

The company's investors will be pleased to have been receiving dividend income for some time. Earnings per share has been crawling upwards at 4.9% per year. Growth of 4.9% per annum is not particularly high, which might explain why the company is paying out a higher proportion of earnings. This could mean the dividend doesn't have the growth potential we look for going into the future.

Starbucks Looks Like A Great Dividend Stock

In summary, it is always positive to see the dividend being increased, and we are particularly pleased with its overall sustainability. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

Market movements attest to how highly valued a consistent dividend policy is compared to one which is more unpredictable. However, there are other things to consider for investors when analysing stock performance. Just as an example, we've come across 2 warning signs for Starbucks you should be aware of, and 1 of them is concerning. Looking for more high-yielding dividend ideas? Try our collection of strong dividend payers.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.