Fitch Downgrades Starbucks Rating to BBB+, Outlook Stable

Fitch Ratings on Wednesday has downgraded the Long-Term Issuer Default Rating (IDR) of Starbucks Corporation (SBUX) to BBB+ from A-, and has affirmed the Short-Term IDR at F2, with stable outlook.

The downgrade reflects its aggressive change in financial policy, the third material revision within the past year, with an increased commitment to return $25 billion of cash to shareholders via dividends and share repurchases over the three year period ending fiscal 2020, up from $9 billion returned during the previous three years, Fitch said.

The rating agency said it expects total debt could increase by almost $10 billion by fiscal 2020 to help finance its cash return goal given Fitch’s projection of FCF before dividends of more than $8 billion over that period and roughly $5 billion of after-tax proceeds from the Nestle licensing agreement.

BBB+ is an investment grade that’s three notches above junk.