#7 - Starbucks (NASDAQ:SBUX)
Starbucks (NASDAQ:SBUX) is the one company on this list that actually has negative free cash flow for the time period ending in June 2020. However, I’m willing to give the company a mulligan because of the pandemic.
If you look at the first half of those 12 months, the quarters ending in September and December of 2019, the company was an FCF animal. But since the start of the year, it’s been a different story. And in the trailing twelve months ending in June, Starbuck’s posted a negative FCF of $449 million. The company’s debt-to-equity ratio was -2.98%.
But there’s a reason for that. In many cases, Starbucks wasn’t open for business in the United States or in China. People overlook the fact that Starbucks has been in China for over 20 years. And the company has over 3,500 locations in China. So the pandemic truly hit the company on two fronts.
However, that situation is long since past. And that means Starbucks should be turning that negative free cash flow into a positive number relatively soon. The “ber” months tend to be very good for Starbucks as they introduce a number of their specialty, limited-time offerings.
Plus, Starbucks pays a small but growing dividend. In fact, the company has increased its dividend in each of the last nine years.
About Starbucks
Starbucks Corporation, together with its subsidiaries, operates as a roaster, marketer, and retailer of coffee worldwide. The company operates through three segments: North America, International, and Channel Development. Its stores offer coffee and tea beverages, roasted whole beans and ground coffees, single serve products, and ready-to-drink beverages; and various food products, such as pastries, breakfast sandwiches, and lunch items.
Read More - Current Price
- $102.50
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 18 Buy Ratings, 8 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $102.81 (0.3% Upside)
Although some of these stocks are considered growth stocks, they are best for long-term investors. However, one of the things all these stocks have in common is that they all generate significant free cash flow.
Free cash flow is one of the best fundamental metrics to gauge the ability of a stock to weather times of uncertainty. And between now and the end of 2020, there will be a significant amount of uncertainty. There is less clarity surrounding the presidential election (and a likely delay in knowing who the winner will be). And the novel coronavirus will continue to be a story. As will any news about a potential vaccine.
And that’s just the news we know about. But that’s the thing about one of these companies. An investment in any one of them should give you the confidence to rest easy knowing your portfolio is secure regardless of what happens in the economy.
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