Liquor Stocks
The big draw to Diageo plc (ADR) (NYSE: DEO) is not just its 2.4% dividend yield, but its valuation and industry-leading operating margin. Diageo’s trailing twelve month operating margin is 34%, compared to top peer Beam’s 25% (see how Diageo stacks up head to head versus Beam).
BEAM Inc (NYSE: BEAM) is the world’s fourth largest premium spirits company, and the second largest in the United States. Top brands include Jim Beam (bourbon), Maker’s Mark (bourbon) and Courvoisier (cognac). One positive for BEAM Inc (NYSE: BEAM) is its geographically diverse revenue streams. Markets outside of North America make up around 44% of sales, with 22% derived from Europe, the Middle East and Africa, and another 22% from Asia and South America.
BEAM Inc (NYSE: BEAM)’s predecessor, Fortune Brands, helped position the company with a nice balance sheet. Fortune had sold off its golf business and spun off its home and security business in 2011, using the proceeds ($1.1 billion) to pay down debt. Although BEAM Inc (NYSE: BEAM) has the best balance sheet, with a long-term debt to equity ratio of 44%, compared to Brown-Forman Corporation (NYSE: BF.B) (69%) and Diageo plc (ADR) (NYSE: DEO) (99%), its valuation and recent performance make the company relatively unattractive. Last quarter’s results showed weakness, with EPS of $0.67 coming in below the $0.71 consensus estimates and below the $0.69 posted in the same quarter last year. However, billionaire Bill Ackman still has a large part of his hedge fund invested in Beam after his activist campaign at Fortune Brands (check out all of Akcman’s stocks).
Molson Coors Brewing Company (NYSE: TAP) also has just over half the long-term debt to equity ratio (43%) as Anheuser’s 95%. All-in-all, Molson has over sixty-five brands that include low-priced options and craft brews. The company has implemented various cost saving initiatives that include closing underperforming breweries to do away with inefficiencies The company also has a synergy program named Resources for Growth Two, which has helped the company save $172 million over the last three years. Part of the Resources for Growth strategy includes combining its UK and Ireland business with its newly acquired Central Europe organization for a singe operating unit in Europe.
Dividends & Valuation
Brown-Forman Corporation 1.5%
Diageo plc (ADR) 2.4%
Anheuser-Busch InBev NV (ADR) 1.6%
Molson Coors Brewing Company 2.6%
Brown-Forman 42%
Diageo 42%
Anheuser-Busch 34%
Molson Coors 52%
The article Time To Get Drunk On Dividends? originally appeared on Fool.com and is written by Marshall Hargrave.
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