Starbucks Example

“During the 2008 financial crisis people said that buying a latte at Starbucks wasn’t smart. McDonald’s put up billboards saying that four dollars for a coffee is dumb. I have saved every analyst’s report and major story (in 2008). My favorites were:

* Never give an 800-pound gorilla caffeine

* Starbucks’s days are numbered

* McDonald’s will definitely kill Starbucks

* How could the board bring back Schultz?”

- Howard Schultz, CEO of Starbucks. Harvard Business Review, August 2010.

Focus on stocks that grow dividends over time. Starbucks is a dividend grower. It was the company's 10th consecutive year of dividend increases.

$10,000 invested in Starbucks stock back in 2009 would have bought you 1,388 shares

Annual Dividend per share was $0.20 ($0.05 every 3 months) x 1,388 shares = $277.60

In 2020, annual dividend increased to $1.80 ($0.45 every 3 months) x 1,388 shares = $2,498.40

Generally if the company keeps increasing the dividend the stock price also goes up over time:

Share price June 1, 2009: $7.20

Share price December 10, 2020: $105.82

$10,000 INVESTED IN STARBUCKS 11 YEARS AGO WOULD BE WORTH $146,878 TODAY.

*This amount would have been much larger if you reinvested the dividends back in the stock over the years.

**You can buy and sell stocks for a profit in your TFSA & RRSP accounts and the proceeds are not (generally) subject to tax. U.S. stocks held in a TFSA are subject to 15% withholding tax on U.S. dividend income. There is NO withholding tax on U.S. stock dividends held in your RRSP. RRSP withdrawals are fully taxable while TFSA withdrawals are always tax-free.

Dividends and Capital Appreciation at work