Covered, compounding — on adjusted earnings. A 3.45% yield on a $1.12 quarterly dividend, raised in July 2026 for the 25th consecutive fiscal year. Reported FY2026 earnings were a $1.30 per-share loss after impairments, which makes a reported payout ratio meaningless — but adjusted EPS was $9.15, putting the payout at 49.0%, and FY2026 free cash flow of $1.2 billion covered the $464.7 million of dividends paid more than two times over.
Key risk: Coffee costs: green-coffee inflation already squeezed margins through FY2026, and FY2027 sales are expected to decline as lower coffee costs are passed through in price cuts — the dividend depends on the cash flow holding up while sales soften.
Changes if: Adjusted EPS falls toward the $4.48 annualized dividend, or free cash flow drops toward the $464.7 million FY2026 dividend total. Cash coverage, not the reported loss, is the tripwire here.
- !Payout-coverage check: Reported FY2026 EPS was a $1.30 loss, so no reported payout ratio is meaningful; on adjusted EPS of $9.15 the $4.48 annualized dividend is a 49.0% payout, and free cash flow of $1.2 billion covered $464.7 million of dividends about 2.6 times. Covered on the numbers that reflect cash, not on the headline loss.
- ✓Yield check: 3.45% indicated — $1.12/qtr × 4 at the $129.98 close on Oct. 23, 2026. Real, earned yield for a single stock, not a special or a return of capital.
- ✓Dividend growth check: 25 consecutive fiscal years of increases; the latest raise, in July 2026, lifted the quarterly dividend 2%, from $1.10 to $1.12.
What this grade doesn't say: It screens the dividend only — covered, real, compounding. It says nothing about valuation or price: a well-covered payer can still be overpriced, and its price can still fall.