Why I'm Reconsidering Starbucks' Role in My Portfolio -- Is There a Better Investment for Income and Growth?

Core Viewpoint - Starbucks has underperformed compared to the S&P 500 over the past five years, prompting a reevaluation of its role in investment portfolios [1] Company Performance - Starbucks has consistently increased its dividend payments for 14 years, with a current dividend yield approaching 3%, which is near its highest level [3] - Revenue growth for Starbucks has averaged a single-digit compound annual growth rate (CAGR) since before the pandemic, which is insufficient for market-beating performance [4] Strategic Options - Starbucks is exploring strategic options for its China business, which has not rebounded as expected post-pandemic [2] - The company is undergoing a transformation under new CEO Brian Niccol, who aims to revitalize the brand and improve the customer experience by closing underperforming locations, with an associated cost of around $1 billion [15][16] Alternative Investment Opportunities - Academy Sports & Outdoors: - Plans to open up to 25 new locations in 2025, with a goal of 150 additional locations by 2028, potentially leading to double-digit growth [6][7] - Currently has a dividend yield of 1%, which may not attract income investors immediately, but long-term growth prospects are promising [9] - Arcos Dorados: - Operates over 2,400 McDonald's locations in Latin America and the Caribbean, with reported revenue growth of 15% when adjusted for currency fluctuations [10][11] - Offers a more attractive dividend yield of 3.5% and retains a significant portion of earnings for future growth [12] - Generates additional revenue through rental income from sub-franchised locations, enhancing its investment appeal [13]