All It Takes Is $10,000 Invested in This Dividend Stock to Generate Over $260 in Yearly Dividends

Here's the simple math first. Starbucks (NASDAQ: SBUX) pays an annual dividend of $2.48 per share and recently traded at around $95 per share.A $10,000 investment buys roughly 105 shares at that price, and that payout works out to about $260 a year in dividend income, paid whether the stock goes up, down, or sideways that year.

It won't replace a paycheck, but it's a useful way to picture what owning this stock actually pays an investor in cash, separate from whatever the share price does on any given day.

Image source: Getty Images.

Starbucks' turnaround is finally showing up in the numbers

Starbucks spent the past two years working through what Chief Executive Officer Brian Niccol branded the "Back to Starbucks" plan, aimed at fixing slow service, inconsistent stores, and an overly complicated menu. On the plan's two-year anniversary in September, Niccol declared the momentum was finally real, and the numbers backed him up.

Global comparable sales rose 7.9%, with North American sales up 8.1%, and customer visits increased alongside that. It was Starbucks's first quarter of positive global comparable sales in seven quarters.

Management also approved the next phase of its store renovation push, part of a roughly $1 billion plan to refresh up to 9,000 cafes, with more than 1,000 stores already updated and a target of 1,500-plus by year-end, according to SIlive.com. At the same time, the company closed about 250 underperforming North American locations, roughly 1% of its footprint, that weren't meeting its bar for either customer experience or financial performance.

Fixing stores a company already has and being willing to close the ones that don't work is a slower and less flashy strategy than simply opening new locations as quickly as possible. But it's also the kind of discipline that tends to support a durable, growing dividend over the following decade rather than a one-quarter headline.

Restructuring in China frees up cash without giving up the upside

Starbucks also fundamentally changed how it operates in China this year, in a way that lowers its risk without walking away from the market's long-term size. The company sold a 60% stake in its roughly 8,000 cafes in China to Boyu Capital for $4 billion, while keeping a 40% ownership interest and continuing to collect licensing fees on use of the Starbucks brand there, according to the AP.

Instead of directly funding and operating thousands of stores in a market where local Chinese coffee chains have been aggressively undercutting it on price, Starbucks now gets paid through its retained stake and brand royalties, while a local partner handles the capital-intensive work of running the stores.

Starbucks has said it now values its China business at more than $13 billion, including the retained stake and ongoing fee stream, and the new joint venture has set a long-term goal of growing to as many as 20,000 locations, according to CNBC. That's a more capital-light way for Starbucks to keep participating in China's growth, with far less of its own cash tied up getting there, and with a partner who understands the local competitive landscape better than a U.S. head office ever could.

How does this add up to a long-term bullish case?

Put the three pieces together: a turnaround that's now showing up in actual customer visits, a leaner and less capital-intensive approach to its largest international growth market, and a dividend that has grown for 15 consecutive years, historically at a pace of around 17.5% annually. According to Tikr.com, the stock is expected to continue climbing toward roughly $3.11 per share by fiscal 2030, a meaningful jump from today's $2.48.

A company that is fixing its core stores, closing the ones that don't work, de-risking its largest growth market, and still finding room to raise its dividend every year is exactly the kind of setup long-term investors should want to own through the next several years.

Micah Zimmerman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool has a disclosure policy.