Updated on July 24th, 2023 by Bob Ciura
Investors looking for companies that generate strong profits and pay dividends should take a closer look at the major alcohol stocks. These are companies that manufacture and distribute a variety of alcoholic beverages, including beer, wine, and liquor.
The top companies in this industry have many attractive qualities. They have popular brands, which give them pricing power and strong cash flow. This allows them to pay dividends to shareholders. Alcohol stocks also tend to perform well during periods of economic downturns, meaning they can provide diversification and recession-resistance to a portfolio.
To the point, one alcohol stock even makes the exclusive Dividend Aristocrats list, an elite group of S&P 500 stocks with 25+ years of rising dividends.
There are currently 65 Dividend Aristocrats. You can download an Excel spreadsheet of all 65 Dividend Aristocrats (with metrics that matter such as dividend yields and payout ratios) by clicking the link below:
More information can be found in the Sure Analysis Research Database, which ranks stocks based upon the combination of their dividend yield, earnings-per-share growth potential and valuation changes to compute total returns.
This article will rank the top alcohol stocks right now.
Table of Contents
The top alcohol stocks are listed here. Stocks are ranked according to their 5-year expected returns. Stocks are listed in order of attractiveness, from lowest to highest.
- Alcohol Stock #6: Brown-Forman (BF.B)
- Alcohol Stock #5: Molson Coors (TAP)
- Alcohol Stock #4: Anheuser-Busch InBev (BUD)
- Alcohol Stock #3: Constellation Brands (STZ)
- Alcohol Stock #2: Diageo plc (DEO)
- Alcohol Stock #1: Ambev SA (ABEV)
Alcohol Stock #6: Brown-Forman (BF.B)
- 5-year expected annual returns: 2.3%
Brown-Forman has an impressive history of dividend growth. The company has increased its dividend for over 30 years in a row, making it a Dividend Aristocrat.
Brown-Forman’s long dividend growth history is due to its strong brands and recession resiliency. It has a large product portfolio, which is focused on whiskey, vodka, and tequila. Its most famous brand is its flagship Jack Daniel’s. Other popular brands include Herradura, Woodford Reserve, El Jimador, and Finlandia.
Click here to download our most recent Sure Analysis report on Brown-Forman (preview of page 1 of 3 shown below):
- 5-year expected annual returns: 3.9%
Molson Coors Brewing Company was founded in 1873. Since then, it has grown into one of the largest U.S. brewers. It has a variety of brands including Coors Light, Coors Banquet, Molson Canadian, Carling, Blue Moon, Hop Valley, Crispin Cider, and the Miller beer brands.
Source: Investor Presentation
In addition to its sizable U.S. presence, the company has diversified internationally into Canada, Europe, Latin America, Asia, and Africa.
Molson Coors enjoys long-standing, entrenched relationships with distributors, retailers, restaurants, bars, and pubs as well as strong consumer loyalty.
Click here to download our most recent Sure Analysis report on Molson Coors (preview of page 1 of 3 shown below):
Alcohol Stock #4: Anheuser-Busch InBev (BUD)
- 5-year expected annual returns: 4.9%
AB-InBev is the largest beer company in the world. In its current form, it is the result of the 2008 merger between InBev and Anheuser-Busch. Today, it sells more than 500 beer brands, in more than 150 countries around the world. Some of its most popular brands include Budweiser, Bud Light, Corona, Stella Artois, Beck’s, Castle, and Skol.
Overall, AB-InBev has 17 individual beers that each generate at least $1 billion in annual sales.
Source: Investor Presentation
AB-InBev has achieved its growth primarily through huge mergers with other beer companies. AB-InBev was first brought together by the $52 billion merger in 2008, between Interbrew from Belgium, AmBev from Brazil, and Anheuser-Busch from the U.S.
Click here to download our most recent Sure Analysis report on BUD (preview of page 1 of 3 shown below):
Alcohol Stock #3: Constellation Brands (STZ)
- 5-year expected annual returns: 5.6%
Constellation Brands was founded in 1945, and today, it produces and distributes beer, wine, and spirits. It has over 100 brands in its portfolio, including beer brands such as Corona. In addition, Constellation’s wine brands include Robert Mondavi and Clos du Bois. Its liquor brands include SVEDKA Vodka, Casa Noble Tequila, and High West Whiskey.
One of the biggest reasons for Constellation Brands’ impressive growth in recent years, is its focus on the premium segment, which continues to grow.
Premium alcoholic beverages also carry pricing power, a key driver of revenue and earnings growth. Constellation also competes in all three categories because spending per consumer is much higher for those that drink all three types of alcoholic beverages. Constellation’s strategy is to capture the market share of the most valuable consumers.
Despite its clear strengths, Constellation Brands does have some risks. These include its heavy dependence on Mexican Beer (which supplies over two-thirds of its operating profits), ongoing and intensifying competition from sizable rivals, and its large stake in Canadian cannabis producer Canopy Growth.
Click here to download our most recent Sure Analysis report on STZ (preview of page 1 of 3 shown below):
Alcohol Stock #2: Diageo PLC (DEO)
- 5-year expected annual returns: 9.4%
Diageo traces its roots all the way back to the 17th century and the Haig family, the oldest family of Scotch whiskey distillers.
Today, Diageo manufacturers some of the most popular spirits and beer brands in the world, such as Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray, Guinness, Crown Royal, Ketel One, and many more. In all, Diageo has 20 of the world’s top 100 spirits brands.
Source: Investor Presentation
Similar to its peers, Diageo’s strong growth is driven by its brand power and lower cost competitive advantages. With 3 of the top 10, 13 of the top 50, and 20 of the world’s top 100 global premium distilled spirits brands, the company enjoys strong consumer loyalty and new consumer preference. This enables them to charge higher prices and increase their margins and returns on invested capital.
Furthermore, the company’s large global volume gives them strong pricing power with suppliers and better economies of scale in production and distribution, cutting costs and further improving margins and economies of scale.
Click here to download our most recent Sure Analysis report on Diageo (preview of page 1 of 3 shown below):
Alcohol Stock #1: Ambev SA (ABEV)
- 5-year expected annual returns: 10.4%
Ambev SA is the successor of two of the oldest brewers in Brazil, Companhia Cervejaria Brahma and Companhia Antarctica Paulista Indústria Brasileira de Bebidas. Antarctica was founded in 1885, while Brahma was founded in 1888.
Today, Ambev operates as a producer and distributor of alcoholic beverages. Its main business is beer, with brands including Skol, Brahma, Antarctica, Quilmes, Labatt, Presidente, and more.
It also has smaller businesses in soft drinks and other non-alcoholic beverages, with brands such as Guarana Antarctica and Fusion. Currently, Ambev has operations in 16 countries, primarily in South America, Central America, and Latin America.
Ambev reported Q1 2023 results on May 4th, 2023. Company-wide net revenue increased 11.3% and earnings per share climbed +8.4% to $0.047 from $0.045 on a year-over-year basis. Revenues increased due to higher volumes in Brazil NAB and Beer and Canada, offset by Latin America South [LAS] and Central America and Caribbean [CAC]. The top line grew due to a 26.9% increase in net revenue per hectoliter offset by a decline of (-0.4%) volume.
Source: Investor Presentation
We expect annual returns of 10.4% for Ambev, based on 3% expected EPS growth, a ~2.4% annual boost from an expanding P/E multiple, and the ~5% dividend yield.
Investors should note that because the dividend is declared in Brazilian currency, payment in U.S. dollars will fluctuate based on exchange rates.
Click here to download our most recent Sure Analysis report on Ambev (preview of page 1 of 3 shown below):
Many alcohol stocks were hit hard as the coronavirus crisis unfolded, but some have come back significantly in recent months. For value and income investors, the recovery in alcohol stocks has reduced the number of buying opportunities due to rising valuations and declining dividend yields.
Still, the world’s best alcohol manufacturers have strong brands, and generate high cash flow that is used for growth investment as well as cash returns to shareholders.
It is also valuable for investors that alcohol stocks are likely to be among the best-performers if a recession does occur. Consumption of alcoholic beverages will stay steady–and could even increase–in a recession. A sustained recovery from the coronavirus would be a major benefit for the biggest alcohol manufacturers.
If you are interested in finding high-quality dividend growth stocks suitable for long-term investment, the following Sure Dividend databases will be useful:
- The Dividend Champions List: a broader group of stocks with 25+ years of consecutive dividend increases, without the S&P 500 Index inclusion requirement.
- The Dividend Challengers List: stocks with 5-9 years of consecutive dividend increases.
- The Dividend Achievers List: a group of stocks with 10-24 years of consecutive dividend increases.
- The Dividend Kings List: considered to be the best-of-the-best among dividend growth stocks, the Dividend Kings are a group of exceptional dividend stocks with 50+ years of consecutive dividend increases.
- The Blue Chip Stocks List: contains stocks on either the Dividend Achievers, Dividend Aristocrats, or Dividend Kings list.
- The Monthly Dividend Stocks List: contains stocks that pay dividends each month, for 12 payments per year.
- The High Dividend Stocks List: high dividend stocks are suited for investors that need income now (as opposed to growth later) by listing stocks with 5%+ dividend yields.