Been watching Starbucks lately and honestly, something's off with their dividend story. You know, for 15 years straight this company was basically the poster child for dividend growth. Started with just $0.05 per share back in 2010 right after the financial crisis, and if you'd thrown in a grand then, you'd be looking at a 28% yield on cost by now. That's the kind of income play that made people love this stock.

But here's what's been nagging at me. That incredible 24.5% average annual growth from 2010 to 2020? It's basically dead. The slowdown started around 2021 and it's been painful to watch. We're talking about going from 8-9% annual increases down to just 1.6% last year. That's not gradual deceleration, that's a cliff.

I get that slowing growth happens to mature companies. But what concerns me more is what's actually driving this. The payout ratio has gotten genuinely scary. Last I checked, the company is paying out over twice what it actually earns in net income. That's the kind of number that usually precedes a dividend slash, and it's hard to ignore.

Then you look at the cash flow picture and it gets worse. Operating cash flow has dropped from around $5.6 billion to under $4.3 billion. That's a significant hit. Normally you'd want to see share buybacks as a cushion here, something to offset the burden, but Starbucks stopped repurchasing shares in 2024. Instead, their employee stock plan is actually adding shares, which dilutes things further. It's like watching someone trying to keep a house of cards standing.

The math is pretty straightforward at this point. The company is essentially holding onto this dividend by its fingernails. CEO Brian Niccol might pull off a turnaround eventually, and maybe the operational improvements will kick in. But realistically, I'd expect them to announce a dividend slash sometime later this year when they typically make those announcements in October. It's not a question of if, it's more about when and how much.

For anyone banking on steady dividend growth from Starbucks, this is probably a good moment to reconsider. The income story that made this stock attractive for so long is running on empty.