Starbucks vs. Dunkin’ Brands: Which Coffee Stock Is Right for You?

Find out which coffee retailer is a better investment.
  • Famed investor Bill Ackman recently revealed an investment in Starbucks worth about $900 million.
  • Dunkin’ Brands announced that it would be changing the name of its flagship stores to simply Dunkin’ to capture more of the beverage market.
  • Starbucks has better value and a stronger dividend, but Dunkin’ is up much more over the last year and has stronger profit margins.

Famed hedge fund manager Bill Ackman of Pershing Square Capital revealed that the fund was now sitting on some 15.2 million shares of Starbucks (SBUX), worth about $900 million. Meanwhile, Dunkin’ Brands (DNKN) officially changed the name of its stores from Dunkin’ Donuts to simply Dunkin’ to reflect its commitment to selling coffee along with an expanded product line.

Coffee drinkers might have their own opinions, but if you’re the type who likes a piping hot cup of stock along with your morning coffee, which makes the better investment?

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Starbucks vs. Dunkin’ Brands Stock Comparison

Here’s a basic comparison of Starbucks and Dunkin’ Brands:

StarbucksDunkin’ Brands
Share Price$56.01$72.04
Market Cap$75.6 billion$6 billion
2017 Revenue$22.4 billion$860.5 million
2017 Profits$2.9 billion$350.9 million
2017 Revenue Growth5%3.8%
2017 Profit Growth2.4%79.4%
GOBankingRates’ Evaluation$30 billion$1.5 billion
P/E Ratio17.4917.49
P/S Ratio3.136.84
Stock Gain/Loss Last Month2.1%-5.9%
Stock Gain/Loss Last Year4.1%33.9%

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Why You Might Pick Starbucks:

  • With a market cap approaching $80 billion, Starbucks is a much larger company.
  • Although P/E ratios are at similar levels, Starbucks might be the better value buy based on its P/S ratio of 3.13 to Dunkin’s 6.84.
  • Starbucks’ dividend yield of 2.58 percent is much better than Dunkin’s 1.95 percent.

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Why You Might Pick Dunkin’:

  • As a mid-cap stock, Dunkin’ arguably has more room to grow and is up over 30 percent in the last year compared with just 4.1 percent for Starbucks.
  • Dunkin’s margins are better, with a profit margin of 41.52 percent and operating margin of 50.55 percent to Starbucks’ 18.87 percent and 15.88 percent, respectively.
  • Growth in profits is much higher for Dunkin, which posted a 79.4 percent gain in 2017, the year after increasing income by 85.9 percent. Comparatively, Starbucks increased profits just 2.4 percent last year.

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The Final Word on SBUX vs. DNKN

Bill Ackman clearly has his reasons for going with the industry leader, and the stronger dividend and better value would each make Starbucks a strong choice. However, Dunkin’ stock has grown much faster over the last year, and the company boasts better margins than its larger competitor.

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