Starbucks to pay its first dividend

Starbucks chief executive Howard Schultz said the chain is back in business. Starbucks chief executive Howard Schultz said the chain is back in business. (Elaine Thompson/Associated Press)
Associated Press / March 25, 2010

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CHICAGO — Starbucks’ chief executive proclaimed its once-stumbling brand is back in business after two years of layoffs and store closings, while the coffee giant issued its first-ever dividend for investors yesterday.

Speaking in front of thousands of shareholders and employees at the company’s annual meeting in Seattle, chief executive Howard Schultz said the brand’s ambitious turnaround effort sliced $580 million from its expenses and the turnaround is now taking hold. “It’s been a long two years,’’ he said. “But the company is extremely healthy and robust.’’

Earlier in the day, Starbucks disclosed the dividend, pledging to return 10 cents per share to investors and ultimately boosting that payment to as much as 40 percent of its annual profit. It also will expand its effort to buy back its own shares.

Companies pay dividends to share profits directly with shareholders, and dividends are often a sign a company has matured beyond the fast-growth stage.

Hit by the recession and overwhelmed by its own rapid expansion, Starbucks began a retreat more than two years ago. It brought back Schultz, who helped build the company, to lead the day-to-day operations. And it shut hundreds of locations and laid off thousands of workers to scale back its spending.

At the same time, the company tried to make over its image, emphasizing some of its cheaper drinks and trying to add more local flair to some of its cookie-cutter locations as it also had to fight off increasing competition from independent coffee houses and big chains alike, including a face-off with McDonald’s Corp.

The changes seem to be working. In 2009, Starbucks’ profit climbed 24 percent and in the past year its share price has more than doubled. The company also saw a yearly increase in the number of customers who visited its locations during its most recent quarter.

Starbucks said the dividend will be paid April 23 to shareholders who own stock April 7.