Starbucks issues first dividend

March 25, 2010 at 12:00a.m.

Associated Press

CHICAGO

Starbucks’ CEO proclaimed its once-stumbling brand is back in business after two years of layoffs and store closings, while the coffee giant issued its first-ever dividend for investors Wednesday.

Speaking in front of thousands of shareholders and employees at the company’s annual meeting in Seattle, CEO Howard Schultz said the brand’s ambitious turnaround effort sliced $580 million from its expenses, and the turnaround is now taking hold.

“It’s been a long two years,” he said. “But the company is extremely healthy and robust.”

Earlier in the day, Starbucks announced the dividend, pledging to return 10 cents per share to investors and ultimately boosting that payment to as much as 40 percent of its annual profit. It also will expand its effort to buy back its own shares.

Companies pay dividends to share profits directly with shareholders, and are often a sign that a company has matured beyond the fast-growth stage.

“Both the dividend and share repurchase programs are strong signals of the health of the company,” said Chief Financial Officer Troy Alstead.

Hit by the recession and overwhelmed by its own rapid expansion, Starbucks began a retreat more than two years ago. It brought back Schultz, who helped build the company, to lead the day-to-day operations. And it shut hundreds of locations and laid off thousands of workers to scale back its spending.

“Growth was covering up mistakes,” Schultz said. “But we cleansed ourselves of that, and we began to understand that we not only had to fix the mistakes but also start righting the ship. ... We realized we had to fundamentally transform the company by taking out cost.”