Answer :
Final answer:
Starbucks' ability to maintain or increase dividends depends on its financial health and strategic choices on reinvestment for future growth. Share repurchase programs may be expanded if the company believes in the intrinsic value of its stock or wishes to consolidate ownership. Having both a dividend and a repurchase program provides flexibility and value to shareholders in different ways.
Explanation:
When considering whether Starbucks will have the cash to continue to pay or increase its dividend, one must look at the company's earnings, payout ratio, and overall financial health. If a firm earns profits but does not pay a dividend, investors might expect capital gains. However, dividends can also play a role in a stock's demand, as expected future dividends can increase a stock's value.
The decision on whether or not to sustain or increase dividends depends on the firm's retained earnings and investment opportunities. Should profits be high and stable, a dividend continuation or increase can be justified. Conversely, if there are lucrative opportunities for expansion or reinvestment that could lead to better long-term gains, it might be wiser for the company to withhold dividend payouts in favor of those investments. As for the question of share repurchase programs, Starbucks should consider expanding it if the company believes its shares are undervalued or if it wants to consolidate ownership. Share repurchase programs can also be a way to return value to shareholders, akin to dividends. A company may have simultaneous dividends and repurchase programs to offer flexibility to investors: dividends provide immediate income, while repurchases can lead to capital appreciation.
