Updated on August 22nd, 2022 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: Constellation Brands (STZ)
- Alcohol Stock #4: Molson Coors (TAP)
- Alcohol Stock #3: Diageo plc (DEO)
- Alcohol Stock #2: Anheuser-Busch InBev (BUD)
- Alcohol Stock #1: Ambev SA (ABEV)
Alcohol Stock #6: Brown-Forman (BF.B)
- 5-year expected annual returns: -1.0%
Brown-Forman has an impressive history of dividend growth. The company has increased its dividend for 38 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.
Brown-Forman reported its fourth quarter (fiscal 2022) earnings results on June 8. Revenue of $1.0 billion in the quarter rose 23% from the previous year’s quarter. Revenues came in above the analyst consensus, beating it by $160 million, or more than 15%. The sales growth rate during the quarter was considerably higher compared to the previous quarter, partially due to a relatively easy comparison with the weak quarter one year earlier.
You can see highlights of the company’s full fiscal year performance in the image below:
Source: Investor Presentation
Earnings-per-share totaled $0.31 during the fourth quarter, which was above the consensus analyst estimate by $0.05. Earnings-per-share were up by 26% compared to the previous year’s quarter. During fiscal 2022, Brown-Forman has earned $1.74 on a per-share basis, which was down year-over-year but which was still better than estimated.
We expect approximately 8% annual earnings growth for Brown-Forman over the next five years. In addition, the stock has a 1.0% dividend yield.
However, Brown-Forman appears significantly overvalued with its high P/E of 39, compared with our fair value multiple of 24.
As a result, the stock has negative expected returns of -1.0% per year. This makes the stock a sell in our view.
Click here to download our most recent Sure Analysis report on Brown-Forman (preview of page 1 of 3 shown below):
Alcohol Stock #5: Constellation Brands (STZ)
- 5-year expected annual returns: 3.6%
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.
We expect Constellation Brands stock to grow earnings by 5.5% per year over the next five years, comprised of volume growth, price increases, and share repurchases. In addition, the stock has a current dividend yield of 1.2%.
However, the stock also appears to be overvalued in our view, leading to total expected returns of just 3.6% over the next five years.
Click here to download our most recent Sure Analysis report on Constellation Brands (preview of page 1 of 3 shown below):
Alcohol Stock #4: Molson Coors (TAP)
- 5-year expected annual returns: 6.1%
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
On February 23rd, 2022, the company announced a 12% increase to the quarterly dividend to $0.38 per share. On August 2nd, 2022, Molson Coors reported second quarter results for the period ending June 30th, 2022. For the quarter, the company generated net sales of $2.92 billion, a 0.6% decrease compared to Q2 2021. Net sales were down 2.3% in North America, but up by 7.2% in Europe, the Middle East and Africa, and Asia-Pacific.
Reported net income equaled $47 million or $0.22 per share compared to $389 million or $1.79 per share in Q2 2021. On an adjusted basis, earnings-per-share equaled $1.19 versus $1.58 prior. The company repurchased 510,000 shares in the first half of 2022. Molson Coors continues to expect net sales to increase by a mid-single digit rate for 2022, on a constant currency basis.
We expect annual returns just above 6% for TAP stock, based on 4% expected EPS growth, the 2.6% dividend yield, and a small reduction from a declining P/E multiple.
Click here to download our most recent Sure Analysis report on Molson Coors (preview of page 1 of 3 shown below):
Alcohol Stock #3: Diageo PLC (DEO)
- 5-year expected annual returns: 7.8%
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.
Diageo has a long track record of generating strong returns for shareholders:
Source: Investor Presentation
We estimate 8% annual earnings growth through 2027, comprised of mid-single-digit organic revenue growth, margin expansion, and share repurchases.
Diageo pays a semi-annual dividend, and increases the dividend regularly. We expect annual returns of nearly 8% per year. Even though we expect 8% EPS growth along with the ~2% dividend yield, we view the stock as somewhat overvalued right now.
Click here to download our most recent Sure Analysis report on Diageo (preview of page 1 of 3 shown below):
Alcohol Stock #2: Anheuser-Busch InBev (BUD)
- 5-year expected annual returns: 8.2%
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.
In 2013, AB-InBev acquired the remaining portion of Grupo Modelo that it didn’t already control, for $20 billion. Finally, AB-InBev acquired SABMiller for over $100 billion.
AB InBev reported Q2 2022 results on July 28th, 2022. Company-wide revenue rose 11.3% as total volumes rose 3.4% and revenue per hl was up 7.5%. Own beer volumes were up +2.7% and non-beer volumes grew +8.2%. Volumes were up in the Middle Americas (+8.2%), South America (+8.6%), but declined in Asia Pacific (-0.4%), EMEA (-0.3%), and North America (-2.7%).
The three global brands of Budweiser (+6.1%), Stella Artois (+7.7%), and Corona (+18.2%) performed well with combined revenues increasing 9.7% outside of their home markets. Normalized earnings per share decreased to $0.73 from $0.75 in comparable periods because of high inflation and labor shortages.
We expect annual returns of 8.2% per year, due to 3% EPS growth, the 1% dividend yield, and a ~4.2% annual boost from an expanding valuation multiple.
Click here to download our most recent Sure Analysis report on BUD (preview of page 1 of 3 shown below):
Alcohol Stock #1: Ambev SA (ABEV)
- 5-year expected annual returns: 10.0%
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.
Related: See our favorite beer stocks analyzed in detail.
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.
Related: Beverage industry stocks ranked.
The company has successfully returned to growth after a multi-year stagnation.
Source: Investor Presentation
Ambev reported Q2 2022 results on July 28th, 2022. Company-wide net revenue increased 14.5% and earnings per share rose 29.9% on a year-over-year basis. Profits increased due to higher volumes in Brazil and Latin America South despite weakness in other regions and lower margins. The top line grew due to a 6.1% volume increase and 12.7% increase in net revenue per hectoliter.
Ambev is benefiting from recovery in global economies but challenged by supply chain issues and higher commodity prices. Volumes were up in Brazil NAB (+16.2%), Latin America South (+1.5%), and Brazil Beer (+8.5%), offset by declines in Canada (-2.9%) and Central America and Caribbean (-10.5%).
We expect annual returns of 10.0% for Ambev, based on 3% expected EPS growth, a ~3.3% annual boost from an expanding P/E multiple, and the ~3.7% 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.