Which Is a Better Income Stock -- Coca-Cola or Starbucks?

Core Viewpoint - Coca-Cola is positioned as a superior income investment compared to Starbucks, despite both companies currently offering identical dividend yields of 2.9% [7]. Company Overview - Coca-Cola has a market capitalization of $300 billion and a current stock price of $69.71, with a gross margin of 61.55% and a dividend yield of 0.03% [3]. - Starbucks, which began paying dividends in 2010, has raised its payouts by 720% over the past decade, resulting in a share price increase of over 1,000% [4][5]. Dividend Growth Comparison - Since 2020, Coca-Cola has increased its dividend from $0.41 to $0.52 per share, a 27% increase, while Starbucks raised its dividend from $0.41 to $0.61 per share, a 49% increase [8][9]. - Both companies had the same dividend payout in 2020, but their growth rates have diverged since then [8]. Financial Metrics - Coca-Cola's payout ratio is 67.7%, indicating a sustainable dividend, while Starbucks has a payout ratio of 103.9%, suggesting it is using cash reserves or debt to maintain its dividend [10]. - Coca-Cola reported a year-over-year earnings growth of 29.8%, contrasting with Starbucks' earnings decline of 47.1% [11]. - Coca-Cola's operating margin stands at 32.2%, significantly higher than Starbucks' 9.51%, which is below the S&P 500 average of 10.8% [12]. Share Buybacks - Coca-Cola has initiated a share buyback program, retiring 1.1 million shares last quarter and planning to buy back $6 billion worth of shares by 2030, which enhances dividend sustainability and earnings per share [13][14]. - Starbucks has not repurchased shares since May 2024, indicating a cautious approach during its turnaround efforts [14][15].