Tuesday, March 11, 2008

Anheuser-Busch Dividend Analysis

Anheuser-Busch Companies, Inc., through its subsidiaries, engages in the production and distribution of beer. The company operates in four segments: Domestic Beer, International Beer, Packaging, and Entertainment.

It is a dividend aristocrat as well as a major component of the S&P 500 index. Over the past 10 years this dividend growth stock has delivered an annual average total return of 12.40% to its shareholders.
















The company has managed to deliver an impressive 9.60% average annual increase in its EPS through organic growth and share buybacks. Management has consistently bought back 3% of outstanding shares each year for the past 10 years, spending a little over $12.5 billion in the process. Without the buybacks the growth in EPS would have been 6.60%
annually.































The ROE has been increasing steadily over our study period, rising from a 27% in 1998 to 67% by 2007.
















Annual dividend payments have increased over the past 10 years by an average of 9.6% annually, which matches the growth in EPS. A 10% growth in dividends translates into the dividend payment doubling every 7 years. If we look at historical data, going as far back as 1983, BUD has actually managed to double its dividend payments every six years.
















If we invested $100,000 in BUD on December 31, 1997 we would have bought 4545 shares (Adjusted for 2:1 stock split in September 2000). Your first quarterly check would have provided you with $590.85 in dividend income in February 1998. If you kept reinvesting the dividends though instead of spending them, your quarterly dividend income would have risen to $1799.16 by November 2007. For a period of 10 years, your quarterly dividend payment has increased by 154 %. If you reinvested it though, your quarterly dividend income would have increased by 204%.
















The dividend payout has remained below 50% over the past 10 years. This is always a plus, since it leaves room for consistent dividend growth minimizing the impact of short-term fluctuations in earnings.
















I think that BUD is attractively valued with its low price/earnings multiple of 16 and above-average yield at 2.86%.

Disclosure: I do own shares in BUD. This is my analysis of the stock and is not investment advice. Please consult with a licenced investment professional before investing.

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8 comments:

  1. very nice analysis. where do you get your historical data from?

    disclaimer:I have some BUD lite cans in the fridge.

    do you own any ?

    ReplyDelete
  2. AMM,

    I do own some BUD. I do not own any canroys though. I haven't done nay research on them.
    I am a fan of uninterrupted increases in dividend payments rather than simply chasing high yielding stocks. The beauty of rising dividends is that over time, my yield on cost would increase to pretty impressive levels.

    ReplyDelete
  3. I'm in total agreement with you on that.

    I was just absolutely certain that oil/gas prices were going to spike and the dollar was going to plummet, so i moved most of my assets accordingly.

    once it looks like this ride is over, i'll be looking at stocks like BUD, VZ, PFE, KFT, MO, JNJ etc.

    But I'm still curious to know where you get your historical data from.

    ReplyDelete
  4. I use several sources to get my data:

    www.morningstar.com for 10 year trends

    Google Finance for more recent data

    Each individual company's website, for any gaps

    For historical prices/dividends i use yahoo finance.

    ReplyDelete
  5. Are you still long on BUD after the merger a few years back?

    Can you provide an updated analysis?

    Thanks

    Jason

    ReplyDelete
  6. Jason,

    The stock was tendered $70/share in 2008. The "BUD" stock you see today is Inbev.

    ReplyDelete
  7. I understand...I am interested in your take on the current stock for Inbev (BUD) at today's price and dividend. The knew ticker only has a dividend history for the last 2 years, but increased 221% this year. The Motley Fool recently highligted their economies of scale and South America growth..."Unlike the U.S., Latin America has a massive young population rapidly coming of age. More than 8 million Latin Americans turn 18 (the legal drinking age in almost every Latin American country) this year; only 4.5 million Americans turn 21. At the same time, the region is becoming richer, with GDP per capita across the region more than doubling in the past six years."

    Also..."Anheuser owns 61% of Companhia Bebidas das Americas (NYSE: ABV ) -- basically the Budweiser of Latin America. This Latin American brewer (known as Ambev) has been so successful that its market cap now actually trumps that of Anheuser Busch."

    Any thoughts?

    ReplyDelete

Questions or comments? You can reach out to me at my website address name at gmail dot com.

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