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Tickers in this Article: SBUX, MCD, DENN, DIN
In this country we cherish aseball, football, family and apple pie. But a good cup of coffee is also probably somewhere near the top of most lists as well. That may be why chains such as Starbucks (Nadsaq:SBUX) and Dunkin' Donuts have achieved the success they have. Let's look at Starbucks on the heels of news that it's recent dividend announcement. (For a look at other companies paying dividends, take a look at Big Dividends in Utilities.)

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Starbucks Pops Open Its Wallet
The Seattle-based company has seen its stock rebound sharply from the low double digits a year ago. Although some wrote the company off a while back, it has found a way to hang tough in a difficult operating environment by offering the customer deals and through the introduction of new products like its increasingly popular instant coffee, Via. Most recently the company made headlines for doing something it hasn't done before - approving a dividend.

Per the release, "The quarterly dividend of $0.10 per share will be paid on April 23, 2010, to shareholders of record on the close of business on April 7, 2010. While future dividends will be subject to Board approval, Starbucks announced that it is initially targeting a dividend payout range of 35 percent to 40 percent of net income."

Announcing a dividend isn't something a company of its caliber would traditionally do unless they were confident there going to be financially fit enough to do so.

Within that same release its board okayed the repurchase of 15 million shares. The company seems to think that the shares are a decent value, since it could be allocating its money toward many other things. This certainly does not guarantee that the stock will trade higher from here, but it is a good sign, particularly with the shares now trading near their 52-week highs.

Other Chains That Dabble In The Coffee Business
A conversation can't be held about this topic without discussing McDonalds (NYSE:MCD). The chain is known first and foremost for its hamburgers and french fries but it also has an impressive foothold in the coffee business and has been making a push in that area in terms of new product. The chain could certainly be a thorn in Starbucks' side down the road. After all the company has extremely deep pockets and thousands of restaurants, so it can compete with Starbucks in many markets.

DineEquity's (NYSE:DIN) IHOP concept sells a lot of coffee, particularly to its breakfast customers. And with the economy inching back it could see more individuals and families coming through its doors, especially in breakfast and lunch hours. The company is expected to earn $2.71 per share this year and $3.17 a share next year. Denny's (Nasdaq:DENN) is a chain that could also see a boost in traffic too. On the downside, it trades under $5 a share, which might make it tough for it to gain attention, but it is expected to earn 32 cents a share this year and 45 cents a share next year.

The Bottom Line
Starbucks is in a good position now. The economy is coming back, and consumers seem a little more willing to spend their cash. The dividend and repurchase news is a good sign that there could still be room for the stock to run.

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